We at FOREXYARD, encourage our customers to get involved in the most intense market events. As such, we think you should know that the U.S. Trade Balance is expected to be released tomorrow, December 11th, at 13:30 GMT, and you need to be prepared. Market events like this one tend to create either big changes to current trends or push current trends even further. Generally, the Majors are the ones most affected by market events in general, but Crude Oil, Gold prices, and even the price of Silver can change dramatically in the seconds after such a publication. For more information about the U.S. Trade Balance please read below.

What is the U.S. Trade Balance?

The U.S. Trade Balance is the difference between the amount of goods and services exported versus the amount imported into and out of the United States. A positive number in this report indicates that there is a trade surplus, meaning the U.S. has exported more than it has imported. A negative number is the opposite: a trade deficit, also called a trade gap. A trade deficit results from importing more than the country exports.

This report is issued monthly, usually 40 days after the end of the month. Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation’s exports. Export demand also impacts production and prices at domestic manufacturers. As such, if export demand grows, even marginally, it will indicate that the USD will gain some small momentum to its recent bullish strength. If, however, the trade deficit continues to worsen, the USD could potentially see a reversal.

If the Report Comes In-Line with Market Forecasts

Currently the U.S. Trade Balance, while a negative number historically, is forecast to increase from -56.5B to -53.5B. If this report is indeed released in-line with market forecasts, then it will signify that demand for U.S. exports has increased slightly. Since U.S. goods and services must be bought with USD, the value of the Dollar will have inherently increased as well as a result of this indicator. Likewise, if this indicator is in fact released as an even higher number than forecast, the bullish run in the USD may continue to gain momentum. With a release of this nature, traders may witness the USD resume its previous bullish run and probably test the 1.2500 price level against the EUR once more.

If the Report Surprises with a Contradiction to Market Forecasts

As of now, the U.S. Trade Balance is predicted to indicate that demand for U.S. goods and services has increased and the deficit has shrunk slightly. If, however, this report indicates that this demand has in fact increased less than forecasted, or even decreased, the result will likely convince investors that the U.S. economy is not in as good a shape as previously thought. As the USD has been flat in recent days, a release of this kind may actually force the Dollar into a deeper bearish correction, testing the 1.3200 level against the EUR in the short-term.

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We at FOREXYARD, encourage our customers to get involved in the most intense market events. As such, we think you should know that the British Official Bank Rate and Euro-Zone Minimum Bid Rate figures are expected tomorrow, December 4th, at 12:00 and 12:45 GMT, respectively, and you need to be prepared. Market events like these tend to create either big changes to current trends or push current trends even further. Generally, the Majors are the ones most affected by market events in general but Crude Oil, Gold prices, and even the price of Silver can change dramatically in the seconds after such a publication. For more information about these Euro-Zone Interest Rates read the information below.

What are the European Interest Rate Figures?

Expected to be released tomorrow are the target Interest Rates of the Bank of England (BoE) and European Central Bank (ECB). These are called the Official Bank Rate and Minimum Bid Rate, respectively.

These figures are each released monthly, usually during the first week of the month. They are important because short-term Interest Rates are the leading factor in determining the value of a currency. In fact, most other economic indicators are used by traders to speculate about the future movement of these Interest Rates.

The British Official Bank Rate is decided on by the Monetary Policy Committee of the BoE. The Euro-Zone Minimum Bid Rate is decided on by the 6 members of the ECB as well as the central bank governors from each of the 15 nations in the European Monetary Union. According to the needs of each respective economy, the banks will elect to increase, decrease, or leave the rate unchanged. Traders pay close attention to these figures as they have a strong correlation with the value of the GBP and EUR.

If Interest Rates are Changed In-Line with Market Expectations

Economic analysts are forecasting that Britain will lower its Official Bank Rate by 100 basis points from 3.00% to 2.00%. The Euro-Zone is also expected to cut its Minimum Bid Rate by 50 basis points from 3.25% to 2.75%.

If Interest Rates are indeed reduced by both central banks, traders may actually expect an appreciation in the GBP and EUR. Typically, a cut to Interest Rates devalues a currency as it increases the amount of that currency available in the market. However, in these times of financial crisis and global economic slow-down, an Interest Rate cut in an exceedingly weakened European economy is seen as an action which is intended to boost consumer confidence and increase spending, which may in fact help strengthen the currencies of the region instead of weaken them.

In this situation, traders may see the GBP gaining strength to test the 1.5500 level against the USD, while the EUR may regain lost ground and trade near the 1.3000 level.

If Central Banks will Surprise the Market with the Opposite

As of now, analysts are predicting a rate cut throughout the Euro-Zone, including Britain. If, however, these rate cuts are not as deep, or if they are not taken at all, the likely result will be a continuation of the current trends for the European currencies. This may indicate that the central banks of the Euro-Zone, as well as the Bank of England (BoE), are either afraid of, or uncertain about the effects of the expected rate cuts. This will indicate a deep fear in the economy and prevent many investors and consumers from regaining confidence in the market.

With this result, the GBP will continue on its downward path and likely test the 1.4600 price level versus the USD. Likewise, the EUR will continue depreciating against the Dollar with the price level of 1.2400 potentially being reached by beginning of the following week.

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