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INTERNATIONAL TRADE

The trade balance portrays the net difference (over a period of time) between the imports and exports of a nation. When imports become more than exports, the trade balance shows a deficit (this is --for the most part-- considered unfavorable). For example, if Euros are sold for other domestic national currencies, such as US Dollars, to pay for imports, the value of the currency will depreciate due to the flow of dollars outside the country. On the other hand, if trade figures show an increase in exports, money will flow into the country and increase the value of the currency. In some ways, however, a deficit in and of itself is not necessarily a bad thing. A deficit is only negative if the deficit is greater than market expectations and therefore will trigger a negative price movement.

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