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Australia Reports Widened Trade Deficit, AUD/USD Lower

Jimmy Yang

Talking Points:

  • Australia reports widened trade deficit for July
  • Expectations for RBA to reduce rates to encourage economic growth likely minimized by recent policy statement
  • AUD/USD trades lower before recovering

The Aussie traded lower against the US Dollar as Australia reported a widened trade deficit of 765 million for the month of July. The reading disappointed market expectations for a trade surplus of 100 million Australian dollars and marked the highest trade gap since January. Deteriorating trade conditions could translate to economic challenges for the country’s exporters that compel investors to expect the Reserve Bank of Australia to reduce rates to encourage economic growth. However, such expectations were likely kept at bay by the RBA’s recent monetary policy statement suggesting a limited scope for rate reduction in the near term.

Prices rallied higher into the release likely due to expectations for a positive reading but moved lower on the disappointment. Although price action did not set an intraday low, the Aussie recover to set a new intraday high.

AUD/USD (5-Minute Chart)

Australia_Reports_Widened_Trade_Deficit_AUDUSD_Lower_body_Picture_1.png, Australia Reports Widened Trade Deficit, AUD/USD Lower

Source: FXCM Marketscope

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Jimmy Yang, DailyFX Research Team

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