The Euro Zone’s seasonally adjusted Trade Balance is set to show a -1.9 billion euro deficit in January, the third consecutive month in negative territory, suggesting trading terms deteriorated -12.8% from a year before. Meanwhile, the external balance has been improving at an accelerating pace in the US: the bilateral trade gap with the European Union narrowed to just -$3.5 billion in December, the smallest monthly shortfall since September 2001 while the overall Current Account gap (the broadest measure of cross-border money flows) shrank to a 5-year low of -$132.8 billion. A widening deficit in the Euro area coupled with a contracting one across the Atlantic implies a net outflow of capital from the currency bloc and into the States, extending current expectations of EURUSD downside into the long-term outlook.
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