Trade Balance

The release

How it is measured.

Trade in goods is compiled mainly from customs declarations, and trade in services from surveys of businesses. Some releases cover goods only and some cover both, which is the first thing to check when two figures differ.

Why markets watch it.

Exports are sold for the exporter’s currency and imports are paid for in someone else’s, so trade is one of the lasting sources of demand for a currency. For economies that sell commodities, the balance follows the prices of what they export.

How it is commonly misread.

A deficit is not a loss and a surplus is not a profit. A deficit can narrow because a weak economy is importing less, which is no sign of health. The figures are in money, not volume, so a change in the price of oil moves the balance although the same number of barrels crossed the border. Trade is also only one part of the flows through a currency, and usually the smaller part.

An explanation of why the release is followed, not a view on what any market will do when it is published. Educational information, not investment advice or a recommendation to trade.