US trade data is pleasant surprise

As far as currency traders are concerned, trade data is the most important in the spectrum of economic indicators. Economic theory suggests a nation’s currency should appreciate when its balance of trade is positive, and vice versa. Accordingly, when the monthly report on US trade data revealed a decline in the US current account deficit, dollar bulls rejoiced. In fact, the deficit narrowed by 4.1%, its largest drop in several months. However, pessimists are predicting that next month’s data will reveal a sharp expansion in the deficit, in order to compensate for this month. AFX News Limited reports:

For the long term, many analysts think structural considerations will become more of a concern to currency markets especially as the US Federal Reserve is expected to call a halt to its rate hike cycle by the summer.

Read More: Dollar wins brief respite from better than expected US trade data