Release Explanation: This is a nation’s total exports of Goods, Services, and Transfers, deducted from its total imports of them. (Not to be confused with the Trade Balance that looks solely at imported and exported Goods).
Current Account Balance calculations exclude transactions in Financial assets and liabilities. It is a comprehensive accounting review of a nation’s Global trade that includes the Trade Balance in its figures. An increase or decrease in the Current Account may reflect an economy’s strength or weakness, but only over a long period of time as a trend builds.
There are many components of this report that can cause fluctuations, including commodity costs, currency valuations and the cost of war.
This is a culmination of the reports that have preceded it. A currency will be impacted by this report mainly as a knee-jerk reaction of Institutions re-aligning existing positions. The longer term trend will normally take time to reverse and therefore take time to impact currency valuations.
Trade Desk Thoughts: Canada's current account balance with the rest of the world (on a seasonally-adjusted basis) was a deficit of $7.5 billion in the fourth quarter of 2008, the first since the second quarter of 1999.
The swing to deficit in the quarter was driven by a lower surplus for trade in goods. This primarily reflected the continued weakening of export volumes compounded by substantial declines in export commodity prices in the fourth quarter, especially pronounced for most energy products. Deterioration in the investment income deficit was also a contributing factor.
In the fourth quarter of 2008, the goods surplus dropped $10.6 billion to $3.7 billion, its lowest level since the first quarter of 1994.
In the capital and financial account (unadjusted for seasonal variation), Canadians repatriated funds in the fourth quarter of 2008, as investors reduced their holdings of foreign securities by a record amount. Both inward and outward foreign direct investment activity was down, reflecting worldwide economic and credit conditions.
The value of goods exported fell $12.6 billion during the fourth quarter. This followed advances in the first three quarters that were supported by strong price gains (driven by energy) in the first half of the year, despite declining export volumes. The largest export declines in the fourth quarter were in energy products (-26.6%) and were entirely due to much lower prices for most products, as volumes advanced.
Industrial goods exports were down $4.0 billion through a combination of lower volumes and lower prices in the fourth quarter. The reduction in volume was widespread, with copper and nickel (including ores and alloys) registering the largest price reductions. Exports of automotive products resumed their downward trend. However, machinery and equipment exports improved further, led by higher prices for aircraft and for other machinery and equipment.
The value of imported goods fell back $2.0 billion in the fourth quarter, with energy prices also a major factor. Energy product imports declined 16.7%, despite higher volumes. Imports of automotive products reached their lowest level in more than 10 years, with more than two-thirds of the decline in passenger autos. Price increases led imports of machinery and equipment to a high, despite generally lower volumes.
Forex Tecnical Reaction: The cad has been rising in overnight trading as crude futures declined by 5.33%.