Australian trade deficit missed expectations widening to 2.637 Billion AUD 2.3 Billion AUD eyed as it hits its worst level in nearly five years. A combination of lower commodity prices, higher exchange rates and a rise in imports all contributed to a deficit in terms of trade for 11th month in row. Exports rose 1% while imports increased 2%.

Experts expect that the trade numbers will improve as the year proceeds but still believe the balance will remain in deficit. Aussie slipped on the release of the data dropping below the 1.0500 level and remained there for the remainder of the Asian and early European session.

The pair has been trapped in a very tight 1.0550 -1.0450 range over the past several days, but continues to find support underneath the 1.0500 figure. For now the markets remain relatively unconcerned about the chronic trade deficits and few traders expect the latest news to influence RBA policy. However, if the trade numbers show further deterioration the central bank may be forced to consider lower rates further in order to lower the exchange rate which is clearly starting to impact the Trade balance as demand for commodities cools.

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