Australia’s Trade Balance figures were released yesterday. To explain the trade balance figure, it is simply the difference between the amount of export and imports of Australian goods and services for the reported month. In another sense, it is a measurement of bilateral trade between Australia and other foreign trade partners. Consequently, when exports are greater than imports, or positive net exports, a trade surplus is created. Essentially this means more revenue is created domestically than Australians sending profitability overseas.
Conversely, when imports are greater than exports, a deficit is created. Therefore, more funds are leaving the country than actual funds coming in coming in. As a result, the report is taken into serious consideration as it indicates stream of goods and services in a country and stands as one of the biggest components of the Balance of Payments report.
The trade balance yesterday was expected to come out a comfortable -200M less than the previous month. At 11.30am a Trade Balance bomb was dropped on Australia, as actual figures came in at -1.9 Billion. The release of this figure saw the AUD fall dramatically. Since April investors have seen the figure continually worsen, however not to this extent. Previous figures for May and June were released at 0.73 billion and -0.12 billion respectively.
Overall, it was just fortunate that the Governor of the Reserve Bank of Australia, Glenn Stevens, mentioned the words that investors needed to hear the day before. Those words were interest rate stability; this diminished any concerns about last month’s hints about interest rate cuts.