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Balance of Trade (BOT) is the fundamental indicator expressed as the difference between prices for exported and imported goods. Trade balance is the quantity index shown for a certain period of time (year, quarter, month), during which settlement for all foreign trade operations is conducted. Trading balance can be positive (active) and negative (passive). If the sum amount of prices of all exported goods exceeds the sum amount of prices of all imported goods, the balance is considered positive. If, on the contrary, sum amount of imported goods exceeds sum amount of exported, the balance is considered negative.
The data on trading balance of the USA is published by The Census Bureau and the Bureau of Economic Analysis of the Department of Commerce. The report is announced at 08-30 a.m EST (Washington) in the middle of every month (more often on Tuesday or Thursday) for the month before the last month.
For a few recent years, trading balance of the USA had been negative, therefore more often Merchandise Trade Deficit (Balance) figure or simply trading deficit is used. Measurement of trading balance figure is a rather complicated task, for that purpose, plenty of export and import categories and groups of goods are analyzed.
Impact on the Forex market
Trading balance has a limited impact on the Forex market. It is primarily related to delaying character of the report (two months back). Secondly, in recent times more attention is given to flow of capital on stock and credit markets than to flow of finance associated with real trade. Thirdly, surplus or deficit of trading balance depend on trade cycle in the country. For instance, under conditions of economic growth, countries try to import more to limit inflation. It allows ensuring consumer demand without raising prices. During recession countries, on the contrary, try to export more through new creation of working positions and revival of demand. Taking into accounts all factors, we have to conclude that forecasting currency fluctuations in relation to trading balance is a rather complicated task.
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