Imports and exports

Posted by Scriptaty | 9:10 PM

In his book The Secrets of Economic Indicators, Bernard Baumohl, director of The Economic Outlook Group and former Time magazine economics reporter, lists the economic data with the most impact on the dollar as the employment report, international trade, GDP, the current account deficit and industrial production/capacity utilization. The ISM report and consumer prices are further down Baumohl’s list, although still in the top 10.

International trade summarizes import and export activity between the U.S. and other countries. In general, the foreign exchange market views any kind of increase in trade surplus as favorable to the dollar, according to Baumohl’s book.

“Trade data is extremely importantto the FX markets right now, especially if the GDP is above 5 percent,” Beuzelin says.

The current account balance data summarizes the net change in four areas: merchandise trade, services, income flows (the net income received from investing in foreign assets) and unilateral transfers (transfers of foreign aid, government grants and pension payments).

Participants in the FX markets generally pay more attention to this data than other types of traders. A deterioration in the U.S. current account balance — essentially a broad accounting of America’s trade and investment relationship with the rest of the world — will, over time, wear away the value of the dollar. If the trade balance or the difference in the value of a country’s imports and exports rises and moves toward surplus, it can hurt the dollar, according to Baumohl.

This data has more impact when the economy is weakening and is currently being closely monitored.

“U.S. growth has moderated enough that it makes [it more likely] account deficits will have an impact on the dollar,” Beuzelin says.

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