Euro area merchandise trade surplus rises slightly in March

Euro area merchandise trade surplus rose very slightly higher in March as anticipated. The surplus rose by EUR 0.3 billion to EUR 21.1 billion. In the first quarter as a whole, the surplus was also slightly higher than its level in the fourth quarter, but both exports and imports continued to be effectively stable. Indeed, having made the largest contribution to GDP growth in three of last year’s four quarters, net trade looks to have made no contribution or subtracted from growth in the first quarter.

Similarly, intra-EA19 trade was widely unchanged in the first quarter of the year, so overall euro area trade flows seem to have stalled at the beginning of the year after rapid growth in 2017. In the meantime, on the balance of payments basis, the merchandise trade surplus remained lower than the average fourth quarter level in March, while both primary and secondary income account balances deteriorated. So, the overall current account surplus dropped to EUR 32 billion, a nine-month low. On a 12-month basis, the current account surplus came in at a sizeable 3.6 percent of GDP, up from 3.5 percent a year ago.

Meanwhile, the ledger, net purchases of euro area equities by foreign residents, which had been on a steep upward trend since the end of 2016, seem to have softened in recent months, consistent with the downward adjustment in economic and stock market momentum so far this year.

This has been partially countered by a slight rebound in equivalent net purchases of euro area debt. Looking ahead, lower euro area growth might aid the primary income balance to rebound over months ahead, noted Daiwa Capital Market Research in a report. But uncertainty regarding global trade policy after the imposition of tariffs by the U.S. and China and softer export orders data suggest that trade flows might continue to be unimpressive compared to recent periods. The likely impact of ongoing Italian political uncertainty on net foreign purchases of euro area securities is more difficult to predict, stated Daiwa Capital Market Research.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Euro was bearish at -90.4626, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 160.332. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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