• US trade deficit widens
  • Sterling breaks lower
  • Schaeuble calls for EU unity
  • RBA policy holds… for now

The US trade deficit is near 5-year highs in the initial reading for January as Americans broadly increased imports consumer products. At $48.5 billion, the figures were in line with expectations but still showing the widest gap since March 2012 which is problematic for the current administration that has committed to reducing the trade deficit. Despite the uptick in imported goods, exports also advanced to the highest value since December 2014.

The euro gave up overnight gains after growth figures showed a drag from trade. Earlier today, German Finance Minister Wolfgang Schaeuble threw his weight behind a united European Union. Schaeuble emphasized the import of sticking together as Brexit negotiations get underway; going as far as to say that Germany is open to discussing debt relief for Greece in 2018 if necessary.

Theresa May’s Brexit bill faces its final day in the House of Lords, after which it will be kicked back to the House of Commons for review. Despite the small victory of a ‘no’ vote on an amendment that would require a second referendum vote, sterling took a tumble as investors are taking account of broader risks associated with Britain’s break with the EU.

Aussie dollar is flat this morning after peaking overnight. The Reserve Bank of Australia held interest rates as expected, but investors are looking for a change in monetary policy in the near future. Governor Lowe noted that economic conditions are improving in his subsequent statement. Lowe also highlighted US monetary policy where interest rates are “expected to increase” as other banks move away from easing monetary policy. This certainly increases the argument for raising interest rates that remain at an all-time low of 1.5%.

EURUSD:   Euro sits lower, giving up overnight gains after growth figures were dragged down by trade.

GBPUSD:  Sterling is weaker as Brexit jitters roil sentiment and the Brexit bill kicks around Parliament.

AUDUSD:  Aussie dollar is flat after giving up overnight gains; RBA leaves interest rates unchanged.

CADUSD:  CAD is weaker this morning as trade to non-US countries fell 4.4%.