Dollar bears are zeroing in on the fiscal hole
Macquarie Bank is out with a note on the US dollar and the trade deficit.
"We feel the rapid deterioration in the US budget and the concomitant increase in funding needs will have a more significant impact than higher US rates," it says.
"It's worth noting that the US is about to embark on an unprecedented fiscal experiment, with the general government budget balance set to increase to around 5½% of GDP in 2019, with the structurally adjusted deficit moving above 6%.
"This is a level virtually unprecedented outside of war.
"While the US fiscal position has been on a steady decline for decades, this is the first time we have seen a fiscal deterioration of the magnitude now planned at a period when the economy is operating near full capacity."
They have an interesting chart where they plot the dollar against the fiscal deficit.
Read more at https://www.businessinsider.com.au/usd-dxy-us-dollar-outlook-twin-deficits-macquarie-2018-2#gR278pilJKj6e3vV.99
