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Trade Balance Report – Forex Calendar

Trade balance announcements report on how much a country is exporting compared to how much it is importing. Countries that export more than they import have trade surpluses, while coun­tries that import more than they export have trade deficits.

If you were to ask the leaders of any government whether they would rather have a trade surplus or a trade deficit, they would all choose a trade surplus. Unfortunately, not every country can export more than it imports. Some countries are net exporters, and other countries are net importers. Watching changes in the level of exports and imports, however, can give you a good idea as to how strong or weak the currency is going to be in the future.

Trade balance data are released in one key announcement that you need to watch:

Trade balance: Measurement of a country’s exports compared to its imports

Impact on Trade Flows

Widening Trade Surplus (Due to Increased Exports) = Increase in Trade Flows

Widening Trade Surplus (Due to Decreased Imports) = Decrease in Trade Flows

Shrinking Trade Surplus (Due to Decreased Exports) = Decrease in Trade Flows

Shrinking Trade Surplus (Due to Increased Imports) = Increase in Trade Flows

Widening Trade Deficit (Due to Increased Imports) = Increase in Trade Flows

Widening Trade Deficit (Due to Decreased Exports) = Decrease in Trade Flows

Shrinking Trade Deficit (Due to Increased Exports) = Increase in Trade Flows

Shrinking Trade Deficit (Due to Decreased Imports) = Decrease in Trade Flows

Impact on Investment Flows

Widening Trade Surplus —> Widening Imbalance in the Balance of Payments —> Decrease in Investment Flows

Shrinking Trade Surplus —> Widening Imbalance in the Balance of Payments —> Increase in Investment Flows (Sometimes Driven by a Hike in Interest Rates)

Widening Trade Deficit -> Widening Imbalance in the I3a lance of Payments -> Increase in Investment Flows (Sometimes Driven by a Hike in Interest Rates)

Shrinking Trade Deficit -> Widening Imbalance in the Balance of Payments -> Decrease in Investment Flows

Impact on Money Supply

Widening Trade Surplus –> Increase in the Money Supply

Shrinking Trade Surplus -> Decrease in the Money Supply

Widening Trade Deficit -> Decrease in the Money Supply

Shrinking Trade Deficit -> Increase in the Money Supply

Impact on Investor Fear

Widening Trade Surplus -> Confident Investors

Shrinking Trade Surplus -> Cautious Investors

Widening Trade Deficit -> Nervous Investors

Shrinking Trade Deficit –> Cautiously Optimistic Investors

Typical Impact on the Currency

Widening Trade Surplus -> Stronger Currency

Shrinking Trade Surplus -> Weaker Currency

Widening Trade Deficit ->Weaker Currency

Shrinking Trade Deficit -> Stronger Currency

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