Europe’s Trade Deficit Widens More than Expected in May
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EUR/USD: The trade deficit in the 16 member euro area widened more than expected for the month of May as the rebound in imports outpaced the advance in exports. Figures from the Eurostat in Luxembourg showed that the trade balance in the euro-zone recorded a shortfall of 3.4 billion euros amid economists’ forecasts of -0.5 billion euros. Also worrying was April’s trade surplus which was revised lower from 1.8 billion euros to 0.3 billion euros. Looking at the breakdown of the report, exports pushed 23.5 percent higher from a year ago, while imports rallied an annualized 29.8 percent. Despite the bloc positing a trade deficit, the EUR/USD continues to push higher, extending its three day gain. The recent break above the 100-day SMA may validate upside potential towards pivot resistance of 1.3034. Going forward, market participants will keep a close eye out for the ECB stress tests measures on July 23rd, while President Jean Claude Trichet is rumored to meet with banks two days before the results are scheduled to be announced. Over the recent months, policy makers have set themselves up for disappoint, and in turn, I do not rule out a scenario typical the Greek crisis; policymakers overlooking the bigger picture, and making a troublesome issue look diminutive. To discuss this and other topics, please visit the EUR/USD forum.
Written by Michael Wright, Currency Analyst
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