The US government will need to find buyers for a veritable tsunami of fresh debt issuance
US retail sales figures for April were slightly weaker than expected, but do not change the picture of an economy that has proven more resilient to the tariff shock than expected.
In particular, weekly jobless claims numbers continue to bounce around near the historical bottom, indicating that no significant layoffs have resulted and that the US economy continues to cruise along at something very close to full employment.
However, the enormous US fiscal deficit, without historical precedent at a time of full employment, and one that is likely to increase even further with the coming Republican tax cuts, may receive more attention in markets.
The US government will need to find buyers for a veritable tsunami of fresh debt issuance precisely at a time when the world's appetite for such assets seems on the wane. The Moody's downgrade may bring this unbalance into sharp focus.”
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
