Budget Surplus and Trade Deficit

By TraderVox.com

Tradervox (Dublin) – Mixed data is seen coming out of the Australian economy. Today early in the morning hours the Australian economy posted Trade Deficit figures. The country’s trade deficit for the month of March doubled to $ 1587 million from previous $ 754 million. This was the highest trade deficit the country has recorded in the past two and half years. In other data coming from Australia the retail sales rose significantly indicating that consumption is gaining momentum in the country, which also reflected in an increase in the business confidence numbers.

The rising consumption boosted demand for imports which are now cheaper due to the strong Australian Dollar. Australian exports of raw materials were severely hit by global economic slowdown particularly due to the declining demand from Chinese manufactures. Also higher commodity prices and strong Australian dollar further hampered Australian exports.

Today in other events the Australian treasurer Wayne Swan presented the budget before the parliament. In his budget speech Mr. Swan expressed optimism that country may be on the track of budget surplus. This he plans to achieve by a series of reduction in government spending.

The markets have reacted negatively to trade deficit data pushing the currency lower against the US dollar.

 In the wake of the huge trade deficit the RBA may cut the interest rates to boost exports and this speculation is driving bearish positions in the AUD. The currency pared off early week gains and turned bearish early in the day. Also fueling the bears are the risk off sentiment in the financial markets after the Greek and the French elections. The Greek and the French election results indicate strong support for anti austerity parties which has renewed fears about the European financial stability and have sparked pessimism that the crisis will not end soon.

 The AUD/USD pair is currently trading at 1.0134 levels. The bearish trend is beginning to gather pace but is obstructed by the tight volatility in the market. The near term support for the currency is at 1.0118 and a break of this level could push the pair to 1.0113 levels.

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