Australian Trade Balance Falls Dramatically In The Face Of Pending Rate Cut

Australian Trade Balance Actual 0.59B, Expected 1.05B Previous 0.98B

Release Explanation: The trade balance figure is simply the difference between the amount of export and imports of Australian goods and services for the reported month with Australia and other foreign trade partners. Subsequently, when exports are greater than imports, or positive net exports, a trade surplus is created. However, when imports are greater than exports, a deficit is created. Simply put, here, there is more money leaving the country than actually coming in. As a result, the report is taken into heavy consideration as it indicates flow of goods and services and stand as one of the biggest components of the Balance of Payments report.

Trade Desk Thoughts: Australia has posted a lower than expected trade balance for the month of December. In seasonally adjusted terms, the surplus was A$0.59 billion; this is a decrease from November’s A$1.05 billion. This softening of the trade balance goes to reinforce Glenn Stevens, Australia’s central bank Governor, view that the economy will be hurt by waning global demand, and the trade balance may narrow further in the coming months as economic growth slows. The RBA is also expected, later tonight, to lower the country’s interest rate by 100 basis points to 3.25 percent. Seasonally adjusted, goods and services fell 2 percent, while intermediate goods and services dropped 7 percent and other goods plummeted 41 percent. Meanwhile, capital goods jumped 20 percent and consumption goods rose 2 percent.

Forex Technical Reaction: The Australian dollar has weakened slightly after this release but it is unlikely the pair will move heavily until the interest rate decision is released at 22:30 EST.

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