Release Explanation: The Current Account is a nation’s total exports of Goods, Services, and Transfers, deducted from its total imports of them. (Not to be confused with the Trade Balance that looks solely at imported and exported Goods).
Current Account Balance calculations exclude transactions in financial assets and liabilities. It is a comprehensive accounting review of a nation’s Global trade that includes the Trade Balance in its figures. An increase or decrease in the Current Account may reflect an economy’s strength or weakness, but only over a long period of time as a trend builds. There are many components of this report that can cause fluctuations, including commodity costs, currency valuations and the cost of war. This is a culmination of the reports that have preceded it. A currency will be impacted by this report mainly as a knee-jerk reaction of Institutions re-aligning existing positions. The longer term trend will normally take time to reverse and therefore take time to impact currency valuations.
The Raw Materials Price Index (RMPI) is a measure of the cost of raw materials purchased by businesses and as such, acts as a leading indicator of prices on the wholesale and consumer levels.
Trade Desk Thoughts: Canada's current account surplus narrowed to $5.6 billion in Q3 2008 (seasonally adjusted), down from $8.2 billion in the previous quarter. The reduction was largely as a result of a lower goods surplus as commodity price gains slowed and a higher investment income deficit as Canadian earnings on foreign direct investment were down.
In the capital and financial account cross-border direct investment flows strengthened, with notably large Canadian direct investment abroad and a resumption of foreign acquisition of Canadian companies. In contrast, with deteriorating conditions on equity and credit markets, Canadian investors' demand for foreign securities slowed while non-resident investors reduced their holdings of Canadian stocks and bonds.
The cost of raw materials fell 12.5% in October, the third consecutive month of declines for this component. In the year to October, prices declined 0.2%, the first year over year decline since February 2004. The decline in October was a result of a sharp drop in prices for non-ferrous metals, which fell 31.8%.
Forex Technical Reaction: The dollar has been strengthening overnight against all major currencies, although it was recently off session highs.