The Aussie dollar was weaker against the US dollar this morning after Australia's trade balance narrowed by more than economists had forecast.
Australia's trade surplus shrunk from $3.44 billion to $1.89 billion in July following a drop in exports to resource-hungry nations China and India. A reduction in the trade balance suggests that Australia imported more than they exported, which generally weakens their currency as there is less demand for goods denominated in Australian dollars. On the other side of the equation, increasing imports means that Australians are selling their Australian dollars to purchase goods denominated in foreign currency, increasing the supply of Australian dollars available in the international money market, thereby weakening the currency. The next catalyst for AUD/USD is likely to come at 1:30pm (London time) today, when the weekly US jobless claims data will be released and ECB President Jean-Claude Trichet is expected to make an address regarding the ECB's latest interest rate decision.
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