Current account balances

Current account balances also influence currency valuations. A country running a current account deficit is importing more than it is exporting and / or borrowing more than it is saving.

Economic theory argues that this imbalance can be addressed by a weaker currency, which would make exports cheaper and imports more expensive. The opposite is the case for an economy running a current account surplus.

While correct in theory, this tends to be a longer term indicator of currency trends. Indeed, the US economy ran a significant current account deficit through the 1990s while the USD appreciated relentlessly courtesy of the productivity boom.

Nonetheless, at times, financial markets still worry about these issues.

Follow these links to learn more about FX Trading.

What is Forex?
How an FX trade Works
Calculating Profit and Loss in Leveraged Trading
Other Key Concepts in Currency trading

Fundamental vs Technical Analysis
Macroeconomic Indicators
Interest rate differentials
Other fundamental issues

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Source: LatitudeFX Limited