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Australian Dollar Leaps on Record-High Trade Surplus

Australian Dollar Leaps on Record-High Trade Surplus

David Cottle, Analyst


Talking Points

  • The Aussie Dollar got an early lift as its home’s December trade data smashed estimates
  • Australia’s second straight trade surplus came in at A$3.5 billion, when A$2 billion had been looked for
  • Exports continue to surge, while imports creep up

The Australian Dollar surged Thursday after its home country’s trade surplus came in hugely ahead of expectations.

December’s official trade balance was A$3.511 billion (US $2.6 billion), when the markets had been looking for a surplus of A$2 billion. This is the second straight month of surplus, and a record high, following a string of deficits going right back to March 2014. November’s surplus was A$2.04 billion.

The numbers are not altogether good news for Australia’s economy because they’ve been generated by exports surging vastly ahead of imports. In December exports leaped by 5% compared to the month before, while imports rose a less-impressive 1%. This of course asks questions about Australia’s internal demand, questions which have already been posed by underwhelming consumer price and retail sales numbers.

However, AUD/USD markets were in the mood to celebrate the positive in the data, which is undoubted good news for Australia’s vast commodity-export machine. AUD/USD pushed up to 0.76215 right after the data, from 0.7600 just before it.

Straight up: AUD USD

Chart Compiled Using TradingView

Some mixed news from the housing market was released at the same time. Building approvals fell by 1.2% on the month in December. That was slightly better than the markets had expected. But they fell by 11.4% on the year, which even allowing for holiday-season construction torpor is a big fall.

Earlier the US Federal Reserve left all its monetary settings alone as expected on Wednesday, by unanimous vote. The US Dollar slipped broadly after the decision, including against AUD, thanks to a Fed statement that markets interpreted as less hawkish than expected. (In monetarist lingo “hawks” prioritize inflation control, often urging early interest-rate rises. “Doves” take a broader view and may be content to let rates to stay lower for longer.)

Still, the greenback’s weakness was short lived and buyers soon emerged. December’s line that the Fed still expects to raise interest rates three times this year is holding.

How does your currency take compare with the markets? Take a look at the DailyFX sentiment page to find out.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.