USD Trade Balance: Lowest In 4 Years

The Trade Deficit is closely watched as it can reveal what is going on within the economy and can have a strong relationship with the underlying currency. With the US being in Trade Deficit (Net Importers) this can have a negative impact on the USD as there is less demand for it. But, the really telling thing is when a deficit turns into a surplus - what does yesterday’s figures bring to the table?

A quick glance will show you that USD is very much in deficit making them net importers of goods. However you can also see that we are gradually moving up towards the zero line, where a cross above it would make US a net importer. The automatic trendline (purple) shows that the deficit is indeed shrinking over the longer term, whilst the current reading of -34.25 is well above its own 3-month moving average. So whilst this is no sure signal of USD strength yet, it does provide a month-by-month gauge of how likely this is to be in the coming months/years.

US Trade Balance: Actual vs Consensus

Typically when we come below expectations the reading is out by -0.2 to -1bn with the current range between -0.2 to 4.2bn. When the reading beats expectations we typically beat expectations by around +1 to +2.4bn. So, yesterday’s reading beating expectations by +5.75bn is a relatively good surprise and the highest since July 2009 (not pictured) when we beat expectations by over 50bn.

Conclusion:
We are in the early days yet, but the defecit is most definately shrinking. If or when the US ever gets back into surpluss this would have long-term implications to dollar strength.

On the shorter-term we know that positive reading above +2.4bn are more lilely to have a positive effect on the USD.


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