Let’s talk about the strength of the US dollar!
US Dollar Strength vs US Trade Balance
The US dollar has significantly strengthened over the last year with the US Dollar Index rising to levels not seen since the early 2000s.
Typically, this makes it harder for US exports since they become more expensive around the world while making it easier for US consumers to substitute international goods and services at a lower cost.
Over most of the last year of the dollar strengthening, the trade balance, that is exports minus imports, has risen as we would suspect. However, over the last few months, this story has reversed with an improving trade balance since the recent lows in March 2022, despite a dollar that continues to rise.
Source: Helios Quantitative Research, Bloomberg