World trade came plunging in the wake of the 2008 financial crisis but, rebounded quickly in 2010. Since that period, growth is pegged at a very slow rate reflecting the weak state of the global economy.
A monthly report from the Bureau for Economic Policy Analysis, also known as the CPB, indicates that the global economy is far from the strong recovery that we have envisioned. Industrial production figures remain unchanged; and for the month of May this year the volume of world trade fell by 0.3%, a stark contrast to the gains of 1.3% in April. The declining trade volumes were predominantly felt in Central and Eastern Europe.
Policy makers and government central banks are keeping a close eye on these CBP figures as it provide the earliest measure of global trade performance. The report is consistent with indicators of economic activity pointing to a slacking global economy. As reported by the Wall Street Journal earlier this month, the International Monetary Fund (IMF) lowered its world trade growth forecast to 3.1%. This is obviously lower than the previous promising grade of 3.6%.
Effect on the Forex Market
Despite the falling world trade output, the USD managed to rise against major currencies. Other factors come into play such as the increase in a recent US manufacturing sector data, and a surging June new home sales that are at a 5-year high. A better-than expected housing data and a rise in US Treasury yields helped bolstered the dollar.
The Intercontinental Exchange (ICE) dollar index grew to 82.285 from 82.024. The ICE dollar index gauges the movement of the USD against the other six major currencies (EUR, JPY, GBP, AUD, CAD, and the CHF).
On the other hand, the Euro fell 0.17% lower and ended its one-month high against the strengthening dollar index and settled at 1.3201.
Data released on Thursday showed UK growth numbers spelling a sustained economic recovery, which accelerated on a year-to-year basis in the second quarter and showed a growth of 1.4%. This made the pound moved higher against the dollar, which was compounded by worse-than-expected US jobless claims figures. As a result, the GBP/USD pair was trading near a four-week high against the dollar at 1.5357, up by 0.28%. Meanwhile, the Pound was lower against the Euro with the EUR/GBP up 0.06 at 0.8624.
Today’s Asian session saw the Australian dollar trading higher than the US dollar with the rising 0.18% to 0.9263. It is speculated that the pair will find support at the 0.9036 and resistance at 0.9318 levels.
Elsewhere, the AUD/NZD currency pair traded up by as much 0.21% to 1.1464, while the AUD/JPY added 0.15% to 91.91.