January’s [B]Euro Zone Current Account[/B] reading is likely to see the deficit widen after showing a -7.3 billion euro shortfall in the previous month. Earlier this week, the trade balance portion of the metric printed worse than economists predicted, showing a -10.5 billion euro deficit versus -9.0 billion expected. Trading terms deteriorated -24.1% from a year earlier as the deepening global downturn dwarfed overseas demand for European products. Indeed, export volumes rose just 4.0% through 2008, the least in 5 years. The capital side of the Current Account equation is unlikely to offset losses from the trade component: the MSCI index of Euro Zone stock performance slipped -7.7% while the Euro shed -6.9% against other major currencies through January. Meanwhile, the external balance has been improving at an accelerating pace in the US: the bilateral trade gap with the European Union narrowed to just -$3.5 billion in December, the smallest monthly shortfall since September 2001 while the overall Current Account gap shrank to a 5-year low of -$132.8 billion. A widening deficit in the Euro area coupled with a contracting one across the Atlantic implies a net outflow of capital from the currency bloc and into the States, extending our medium-term expectations of EURUSD downside into the long-term outlook.