The US Commerce Department will report their trade balance figures for July today. The U.S. trade deficit was probably little changed in July as imports and exports both grew, signaling a revival of commerce as the global slump eased. Economists are forecasting a deficit of $27.1 billion. While that improved from the -$64.9 billion a year earlier, it has been little changed since February.
For the first time in at least 2 years, deficits are starting to matter to currency investors, and that may be bad news for the U.S. Dollar. Although much of the report showing deterioration in the Trade Balance is probably due to higher oil prices, the trajectory of widening is consistent with analysts’ longer-term forecast for the foreign sector.
As the economy recovers and consumer spending returns to a more solid footing, demand for imports will return, widening the trade deficit over the coming quarters.
If the actual figure comes in-line with the expectations, or weaker, forex traders can expect the EUR/USD to trade at new highs, with targets of $1.4620 and 1.4660.