TRADE BALANCE

Definition

Trade balance is a measurement that is often used by the forex broker or trader when determining the health and future of a country’s economy.

This figure is the ratio of exports to imports. A greater number of exports than imports represents a trade surplus and a positive trade balance. A greater number of imports than exports represents a trade deficit and a negative trade balance.

The three primary factors for determining trade balance are the price of goods in the country, the exchange rate between two currencies, and the taxes and tariffs levied on imports or exports.

Forex Trading Importance

Trade balance and exchange rate are key factors for forex trading. Trade balance greatly depends on the exchange rate between two countries; this makes it an important indicator of the forex market’s current and future states. Changes are often reflected on forex trading platforms.

Information about net exports and imports can also help forex brokers and traders predict inflation and foreign investment trends.

Trade Balance Source

Many measures exist for trade balance, but the source used most by individuals involved with FX trading in the US is the International Trade Report. This report is compiled by the Census Bureau and the Bureau of Economic Analysis; it covers the performance of a number of exported goods and services in various economic sectors.