The Balance of trade is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and consists of exporting more than is imported; a negative balance of trade is known as a trade deficit. The Trade Balance is part of a countries Current Account. The current account of the balance of payments is the sum of the Balance of Trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid).
The news can have a big affect on the Currency Market. A bigger trade surplus is usually good for a nation’s currency. Let’s look at GBP/USD during the January 2007 US trade balance and see how it affected the market. The forecast was -$60 billion and the actual was -$58.2 billion. $1.8 billion better than expected, so the market would see this as dollar positive
As you can see, the market moved with the numbers, the dollar strengthened. If you had have sold GBP/USD during the retracement, it would have been a good trade.
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