The Big Economic Picture

The weak February employment report caused the U.S. dollar to fall this past week. After strengthening against major currencies such as the euro and yen over the past couple of weeks, the greenback may give back more of those recent gains. That's because this week's economic data focus on America's "twin deficits": the current account and the federal deficit.

The current account, a measure of trade and financial transactions with the rest of the world, probably posted a deficit of $136.5 billion in the fourth quarter. That would put the total current-account gap for 2003 at $550 billion, or 5% of U.S. gross domestic product. The increase was most likely led by a widening in foreign trade. Over the fourth quarter, the trade deficit totaled $122.4 billion, compared with $121.3 billion in the third quarter.

Going forward, the large decline in the U.S. dollar should help boost exports. Over the past year, the dollar has fallen 13% against a trade-weighted basket of major foreign currencies. This makes U.S. goods and services more attractive abroad because they're cheaper when prices are converted into euros or Canadian dollars.

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