On Friday, the main conclusion from the series of Manufacturing PMIs was that key economies of the world weren’t as bad off as expected. China’s official NBS survey was slightly below expectations, but that was compensated for by the improvement in the private Caixin survey. By far the most positive of the major economies remained the US. That fit in with remarks by US Secretary of the Treasury (and former Fed Chair) Janet Yellen, who said that the US was driving economic growth around the world.
For forex traders, that means the upcoming trade data might provide a boost for commodity currencies and shed light on the global trade balance. And it seems like they could really use the help. There is growing speculation that the RBA not only won’t tighten, but will turn to easing soon. The RBNZ disappointed by not hiking, and said it was worried about overtightening. And Canadian GDP has not been all that vigorous, despite the good results in its larger trade partner, which could affect global trade balance.
Where the Focus Will Be
The US’ resilient economy can be measured in its robust trade. If both imports and exports are increasing, it could be understood as a sign that the world’s largest economy is still firing on all cylinders. That, ironically, could end up weakening the dollar as the market is waiting for any sign that the Fed will cut faster than expected.
If Chinese trade continues to increase, both in and out, then it might provide some relief to traders waiting on the world’s second largest economy to get past the housing market inspired doldrums. Combined with better results from the US, this could lead to a resurgence in investor appetite, helping out emerging markets and further weakening the dollar. On the other hand, if the general theme from the trade data is of further slowing, then it could hurt risk appetite and give the dollar a boost. That is possible in the context of the Red Sea crisis which is still making global shipping slower and more expensive.
What to Look Out For
China’s trade surplus is expected to see a large jump to $106B compared to $75.3B last month. This is thanks to forecasts that exports will grow substantially faster than imports at 3.0% compared to 1.0%. While this might not directly help currencies of countries that export to China, the strong demand for Chinese experts might help reassure investors that the global economy is doing well. And that, in turn, means that Chinese imports might rise in the near future.
There might be some foreshadowing of China’s trade data, since a couple of hours ahead of it, Australia will report its own trade balance, which is expected to see a surplus growing on increased Chinese demand.
Other Big Players
America’s trade deficit is expected to expand slightly to -$64.5B from -$62.2B, with imports expected to increase faster than exports. That’s an expected phenomenon if the US economy is doing better than many of its trade destinations, such as Europe.
Healthy US imports would help reassure investors that the economy is doing well, and could help support the Canadian dollar. That’s assuming Canada’s own trade balance doesn’t fall too far into deficit, as the country is expected to report growing imports despite the economic turbulence.
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- Source: https://www.orbex.com/blog/en/2024/03/global-trade-balance-the-economy-getting-a-rebound
