US Dollar Rallies as Fed Announces Measures to Address Liquidity Pressures

US Trade Deficit Widens Less Than Expected

The US trade deficit widened less than expected in January to -$58.2 billion, a 0.6 percent increase from December, as exports grew 1.6 percent while the US dollar plunged towards record lows. Meanwhile, imports gained 1.3 percent from the month prior, led primarily by a 10.4 percent surge in crude oil. However, imports of consumer goods declined 4.3 percent, indicating that households are tightening their purse strings.

The US dollar and carry trades are rallying significantly, but it is primarily the result of an announcement by the Federal Reserve that said they will expand their securities lending program. Furthermore, the FOMC authorized increases in its swap lines with the European Central Bank and the Swiss National Bank of up to $30 billion and $6 billion, respectively. The news bodes well for US equities today, as well as the greenback. For the full text of the Federal Reserve's announcement, click here.

DailyFX