FX Closing Comments

Today it was the "twin deficit" concern that gave the Dollar a spook and sent both the Pound and Euro higher. After it was reported that 2005 marked an all-time high for the current account deficit ($804.9b), stories appeared that highlighted Fed Chairman Bernanke's concerns about the size of the federal budget deficit. Adding to the Chairman's point of view were comments from the head of the General Accounting Office, who said that the USD budget deficit was "imprudently high," adding that the US financial position was worse than the government thinks.

Additional poor sentiment may continue tomorrow when the Treasury inflow data is released. With January's record trade deficit standing at $68.5b, analysts will be looking for something higher. As last month's inflow number was $56.6b, the signs are not especially promising.