The New, Strengthened US Dollar

09/11/2008 12:00 am EST

Focus: FOREX

John Jagerson

Co-Founder and Contributor,

Today we are going to get our first picture of how the newly strengthened US dollar (USD) has affected US exports. The silver lining of the weak USD during the early part of 2008 has been a decrease in the trade deficit because it has been cheaper for international importers-especially those in Europe-to bring in goods from the US.

However, with the USD strengthening, it is suddenly not so cheap to import goods from the US, and this is bound to affect the trade deficit. Of course, you are going to have to dig into the numbers a little bit to really see what is going on because the drop in oil prices is going to make it look like the trade balance hasn't been affected much.

Here's what I mean, the drop in oil prices is going to make it look like there was a decline in imports to the US. This on its own is good news for the trade deficit. However, I believe the gains we make from the decline in oil prices are going to be offset by the losses we see on the export side of the equation. The stronger USD and weaker economies around the globe will stifle US exports.

Here are the economic announcements you need to keep a close eye on tomorrow:

  • USD Trade Balance
  • USD Import Price Index
  • JPY Gross Domestic Product (GDP)

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