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Will US budget deficit reach $1 trillion in 2018?

business-articlesWill US budget deficit reach $1 trillion in 2018?
  • Economists forecast sharp rise in US budget deficit
  • Australian business sentiment to slide?
  • AUD may be weakened by muted home loan growth
Will US budget statement weaken USD?

The US will publish its latest budget statement later this afternoon and expectations of a significant gap in the budget is leading many investors to brace for a possible downtrend in the US dollar.

Economists forecast that after recording a $49bn surplus in January due to increased tax receipts, February will bring a sharp reverse, with the US expected to report a budget deficit of around -$222bn.

This would be the largest deficit in over a year and is expected to be partly driven by the tax reforms implemented by Trump at the end of 2017.

If so, it is likely to do little to quell fears of a yawning budget gap, with a number of analysts suggesting that 2018 could see the return of trillion-dollar budget deficits.

AUD poised to slide on Australian business confidence

The Australian dollar may be forced to cede ground in overnight trade on Monday as analysts suggest that domestic business confidence is likely to have tumbled.

Current predictions suggest that NAB’s business confidence index is likely to have slipped from a nine-month high of 12 to 9 in February.

Analysts suggest that slowing retail sales and weaker employment figures will likely have contributed to a more pessimistic outlook for businesses last month.

However with a similar outcome forecast ahead of January’s reading, there still remains some hope that February’s figures could also beat expectations. 

Australian mortgage approvals expected to remain flat

Also possibly weighing on the Australian dollar in the overnight session will be the release of Australia’s latest mortgage figures.

After the total number of new home loans issued in January fell by 2.3% in December, analysts suggest that mortgage approvals are likely to have remained muted at the start of 2018.

Analysts also expect the total value of loans is likely to have remained flat in January as well, which may put further pressure on AUD.  

Upcoming Data

Monday, 12 March, 2018
18:00                     USD US Budget Statement

Tuesday, 13 March, 2018
12:30                     AUD Business Confidence
12:30                     AUD Home Loans
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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