USD Current Account 3Q (13:30 GMT; 08:30 EST)
Expected: -183.7B
Previous: -190.8B

How Will The Markets React?

US Current Account is expected to shrink further to -183.7 Billion in Q3 from -190.8 Billion the quarter prior. The news, if it meets expectations, could prove supportive to the US dollar as it would indicate that US Balance sheet is in the process of becoming repaired after coming to within a whisker of registering a -$1 Trillion Current Account deficit on annual basis. With capital flows one of the main issues dogging the dollar, an improvement in the Current Account status could be of help to the greenback and may push EUR/USD further below the key 1.4500 level.

Bonds – 10-Year Treasury Note Futures

Treasuries gave up all of yesterday’s gains following the hotter than expected CPI numbers which suggested that pricing pressures would make the Fed more reluctant to lower rates further for the time being. Combined with better than expected data on retail sales, the most recent economic news suggests that the risk of recession has faded and yields therefore may rise as a response.

FX – EUR/USD

The euro was victim of continued dollar rally throughout the night as realization by the market that the US economy appeared healthier than originally thought spurred massive profit taking in the pair, which has been overbought for a very long time. The EUR/USD broke through the critical support level of 1.4500 but stalled there awaiting fresh news to get further directinality.

Equities – Dow Jones Industrial Average

The Dow recovered somewhat from the prior day’s sell-off with equities ending on the highs as better than expected Retail Sales data reignited interest in stocks. Looking forward, the Current Account news should have minimal impact on stocks but the hotter than expected CPI news may weigh a bit as hopes for further rate cuts may fade.

Terri Belkas is a Currency Strategist at FXCM.