Release Explanation: A country’s exports minus its imports; the largest component of a country’s balance of payments. An increase or decrease in the Trade Balance will help determine the future economic outlook and growth numbers in a region. It can impact all aspects of an economy as it is the way that region balances its books.
This is a standalone valuation of the reliance, or not, of imported Goods compared to what is being sent abroad. A currency will be greatly impacted by this report as the costs of buying Imports, or selling Exports, is reliant upon a currency’s valuation to a degree. A country that Exports more than it Imports (China for example) will benefit from a weaker currency; its Exports are cheaper for foreigners to buy, and vice verse.
Trade Desk Thoughts: The U.S. trade balance for January 2009 narrowed by 9.7% to a deficit of $36.0 billion, the Commerce Department said today. It was the smallest deficit in 6 years. January's exports were $124.9 billion, down $7.6 billion (-5.7%) from December, while imports totaled $160.9 billion, down $11.5 billion (-6.7%) from the previous month.
The numbers reflect a slowing global economy,' said Matthew Carniol, chief currency strategist at TheLFB-forex .com. The global economy could be facing its worst slump in 80 years for 2009.
The World Bank this week predicted that global GDP will decline, but didn't provide an exact estimate.
The narrower gap mainly reflected a drop in the price of imported oil. In real terms, which the government uses to calculate GDP figures, the trade deficit widened to $44 billion, the most since October.
In January, the deficit with OPEC dropped to $3.9 billion, the smallest since November 2003, and the gap with Japan shrank to the lowest level since January 1998, as U.S. imports fell to an almost 16- year low.
The deficit in trade with China increased to $20.6 billion in January from $19.9 billion in December as U.S. exports fell faster than imports.
Demand for U.S. goods such as cars and semiconductors plunged to the lowest level since September 2006 as the global economy weakened and the dollar gained strength on the deleveraging in financial markets.
The trade gap with Canada, the U.S.'s biggest trading partner, narrowed to the lowest level since May 1999, and the deficit with Mexico was the smallest since January 2002. The shortfall with the European Union was cut in half from $7 billion in December to $3.5 billion the following month.
Forex Technical Reaction: S&P futures were recently trading up about 5 points, in a lackluster overnight session. The dollar has gained in recent trade on the pound, yen and Australian dollar as it fell against the euro.