The return of the twin deficit? – Commerzbank

Source Fxstreet

You have to look long and hard to find any arguments in favor of the dollar at the moment. And I fear that, in all the turmoil, another structurally negative constellation could ultimately emerge, one that the 'old hands' among us in the market probably still remember: the US twin deficit. After the dot-com bubble burst in the early 2000s, the dollar came under pressure for years as markets took a very critical view of the large budget deficit combined with the large trade deficit in the US and punished the dollar, Commerzbank's FX analyst Antje Praefcke notes.

The debate about the US budget is gaining momentum

"I fear that the market could soon realize that we could be facing such a situation again. On the one hand, most of the tariffs announced since 'Liberation Day' have been suspended for the time being, so no reduction in US imports is to be expected. At the same time, however, the US continues to consume a lot of foreign goods. A reduction in the US trade deficit, especially on a sustainable basis, therefore seems unlikely at this point in time."

"At the same time, the debate about the US budget is gaining momentum. Tariffs will not be nearly enough to plug the holes in the budget. Savings in most areas of the budget are difficult to implement. At the same time, there are fears that, with 10-year US Treasury yields now at 4.5%, it is inevitable that interest payments will significantly increase in the budget, making budget consolidation even more difficult. The market could therefore increasingly question the US's debt sustainability."

"If we really do fall back to the beginning of the 2000s and the market runs with this new old topic, the dollar could face a prolonged period of weakness, in part due to the 'twin deficit.' Therefore, I will pay attention to whether I read and notice this word more often from now on, even if I almost couldn't hear it any more back then."

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin CME gaps at $35,000, $27,000 and $21,000, which one gets filled first?Prioritize filling the $27,000 gap and even try higher.
Author  FXStreet
Aug 22, 2023
Prioritize filling the $27,000 gap and even try higher.
placeholder
Ethereum (ETH) Underperforms All Top 5 Major Cryptos in Brutal 2025 DowntrendDespite signs of improving momentum, with RSI climbing and EMA lines hinting at a potential breakout, ETH continues to lag behind competitors like Solana in multiple metrics.
Author  Beincrypto
Apr 23, Wed
Despite signs of improving momentum, with RSI climbing and EMA lines hinting at a potential breakout, ETH continues to lag behind competitors like Solana in multiple metrics.
placeholder
Analysts Highlight 4 Reasons Why ETH Price Could Rebound Strongly in MayEthereum (ETH) has declined for five consecutive months. However, it enters May with rising optimism.
Author  Beincrypto
May 07, Wed
Ethereum (ETH) has declined for five consecutive months. However, it enters May with rising optimism.
placeholder
Ethereum Price Ready to Surge—$2,000 Level Could Be Within ReachEthereum price started a fresh increase above the $1,800 zone. ETH is now rising and attempting a move above the $1,850 resistance. Ethereum started a fresh recovery wave above the $1,820 resistance.
Author  NewsBTC
May 08, Thu
Ethereum price started a fresh increase above the $1,800 zone. ETH is now rising and attempting a move above the $1,850 resistance. Ethereum started a fresh recovery wave above the $1,820 resistance.
placeholder
Bitcoin Weekly Forecast: The calm before the stormBitcoin (BTC) price remains steady above a key support level, trading slightly above $106,000 at the time of writing on Friday.
Author  FXStreet
Jun 20, Fri
Bitcoin (BTC) price remains steady above a key support level, trading slightly above $106,000 at the time of writing on Friday.
Related Instrument
goTop
quote