Among the main developments:
- There has been some evidence of further progress in reducing the large external imbalances of the major countries. Although the US current account deficit widened further in the first quarter, reflecting swings in the volatile invisibles component, there was a marked reduction in the trade deficit. Japanese monthly trade data have also shown a sustained reduction in the trade surplus since the beginning of the year.
- Activity in the international capital markets in the second quarter continued the strong recovery seen in the first, supported by the buoyancy of output in the major countries and a revival of confidence after the stock market slump in October last year.
- In the foreign exchange markets in the second quarter, the dollar was strongly influenced by the evolving pattern of us trade figures, weakening at first following publication of an increased deficit (for February) but recovering strongly thereafter as data for the two succeeding months showed marked improvement. Over the quarter as a whole the dollar rose by 6% in effective terms.