Trade Deficit

A trade deficit, indicating that imports have exceeded exports, is normally seen as an adverse indicator as money flowing out of the country to buy foreign goods may well have a devaluing affect on the currency.However, fundamental analysis will also give an indication of the expectations of the market and these will normally dictate whether or not a trade deficit is unfavorable.


For instance, it may be the case that a particular county usually operates with a trade deficit and that this fact has already been taken into consideration in fixing the price of its currency.Generally, a trade deficit will only affect currency prices where they are higher than the market would normally expect to see.Each country has got its own particular set of economic indicators (presently there are in the region of 28 major indicators in use within the United States) and these have a strong influence on financial markets.As a result, Forex traders must be aware of them and examine them carefully when they are preparing their trading strategies.

Luckily, for traders who are working on the Internet, many websites today provide a wealth of the latest information, but it is up to individual Forex traders to extract this information and apply fundamental analysis to it in order to formulate their trading decisions.