Wednesday's Markets Update (June 7, 2023)

08 Jun 2023 by rate3

On Wednesday, the trade deficit widened, reaching 6-months high, and NASADAQ (o:13295, c:13104, -1.4%) as well as BTC (o:26802, c:26482, -1.2%) declined on technicals.

In April, the US trade deficit reached $74.6 billion, a six-month high, compared to March's $60.6 billion reading. Exports fell 3.6% to $249 billion, while imports increased 1.5% to $323.6 billion. The largest deficits were with China ($24.2 billion), the EU ($17.3 billion), Mexico ($13 billion), and Vietnam ($8.5 billion). Surpluses were seen with the Netherlands ($4.2 billion), South and Central America ($4.1 billion), Belgium ($1.9 billion), and Hong Kong ($1.6 billion).

The government has been able to sustain a high trade deficit and a strong dollar exchange rate, largely thanks to the dominance of the US dollar in global markets. The dollar's reserve currency status and its widespread use in international trade have provided stability, demand, and investment flows that support the country's economic conditions. However, maintaining this equilibrium might be tricker in the future as more and more countries start to reduce their dependence on the greenbuck in the international commerce.

Other Markets Updates:

Japan: Country's Q1 2023 economy grew by 2.7% on an annualized basis, surpassing the preliminary 1.6% rise. It exceeded market expectations of a 1.9% expansion. Increased private consumption, a strong business rebound, and rising government spending supported the upturn. However, net exports had a negative impact due to global trade uncertainty.

India: The RBI left its policy repo rate unchanged at 6.5% during the June 2023 meeting. India's annual inflation dropped to 4.7% in April, reaching an 18-month low and staying within the RBI's target range of 2%-6%. The RBI had previously raised rates by a total of 250 basis points since May 2022, bringing borrowing costs to levels last seen in January 2019. The growth forecast for fiscal year 2024 remained at 6.5%, with quarterly estimates of 8% in Q1, 6.2% in Q2, 6% in Q3, and 5.7% in Q4. The inflation forecast was revised down slightly to 5.1% from 5.2%.

Brazil: May 2023 annual inflation rate fell to 3.94% from the previous month's 4.18%, hitting a 2-year low and below the forecast of 4.04%. It marked the 3rd consecutive month below the central bank's 4.75% target. The 13.75% Selic rate, one of the world's highest, aided this. Transportation prices dropped faster at -4.75% versus April's -2.92%, driven by a sharp decline in gasoline prices (-25.85%). Food inflation slowed to 5.54% from 5.88%, while housing and utilities rose to 4.03% from 1.59%. Monthly consumer prices increased by 0.23%.