The British Trade Balance indicator, published monthly, focuses on the difference in value between exported and imported goods. A reading which is higher than the market forecast is bullish for the pound.
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Wednesday at 9:30 GMT.
Indicator Background
Traders should pay close attention to the reading, since there is a close connection between trade balance figures and the demand for local currency. Stronger exports translate into foreigners purchasing more British pounds to pay for locally produced goods. Moreover, a healthy trade balance is good for both the UK economy and the pound.
The December indicator brought some sorely needed positive economic new on two accounts. First, the indicator climbed nicely from -9.8B to -7.6B. Second, the reading was much higher than the December forecast of -9.6B. The forecast for this month predicts a drop to -8.2B. Will the indicator prove the markets wrong again, and continue on an upward swing?
Sentiments and levels
Economic indicators in the UK were slightly up last week, including those in the manufacturing, construction and services sectors. However, with Europe in deep trouble and the UK economy still mired in a slowdown, it remains to be seen whether these figures are just a short-lived upswing. Across the pond, the US economy appears to be gathering steam, and the dollar is poised to continue its rally against most major currencies. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.5815, 1.57, 1.5580, 1.5415, 1.5360, 1.5530 and 1.5270.
5 Scenarios
- Within expectations: -8.7B to -7.7B: In such a case, GBP/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: -7.6B to -7.0B: An unexpected higher reading can send the pair well above one resistance line.
- Well above expectations: Above -7.0B: Another strong reading would prop up the GBP, and a second resistance line might be broken as a result.
- Below expectations: -9.4B to -8.8B: A sharper decrease than forecast could push GBP/USD downwards, breaking one level of support.
- Well below expectations: Below -9.4B: A weak figure would push the pair downwards, possibly breaking two or more support levels.
For more about the GBP, see the GBP/USD.