The merchandise trade balance is one of the most important economic indicators and its value may trigger long lasting changes in the monetary and foreign policies. The trade balance consists of the net difference of the imports and exports of an economy. Items that are traded may include food, raw material, industrial supplies, customer goods and other merchandise.
The merchandise trade balance is interrelated to the changes in foreign exchange market. For example, the US dollar was relatively high against other currencies. Then, the US exporters were in disadvantage. Their high price products lost competitive in the international market. In order to rebalance the economic disequilibrium, the US dollar was devalued in short term period.
Sources: http://ikofx.com/en/fundamentalanalysis.php
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