Australia's monthly trade surplus narrowed from A$12.985 billion in December to A$11.688 billion in January. Exports rebounded after a period of weakness, while import growth also picked up.

In seasonally adjusted terms, the value of exports rose 1.4 percent on the month in January after falling 0.4 percent in December. This is the first increase since September. Exports of non-rural goods (around 60 percent of the total) rose 1.5 percent on the month after falling 1.7 percent previously, rural goods (around 15 percent of the total) fell 2.9 percent on the month after dropping 4.9 percent previously, and services exports (around 20 percent) rose 3.1 percent after advancing 2.6 percent previously. Year-on-year growth in total exports moderated from 26.5 percent in December to 18.6 percent in January.

Seasonally adjusted imports rose 5.0 percent on the month in January, strengthening sharply from no change in December. Imports of consumption goods, capital goods and services all posted solid increases on the month, with imports of intermediate and other merchandise goods posting a smaller decline. Total imports rose 25.7 percent on the year in original terms in January after advancing 13.5 percent in December.

Consensus for goods and services trade in January is a surplus of A$12.7 versus December's surplus of A$12.2 billion. Exports, down 1.4 percent on the month in December, have fallen for three straight reports.

The Merchandise Trade Balance measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the Australian dollar in the foreign exchange market. Imports indicate demand for foreign goods while exports show the demand for Australian goods in its major export market China and elsewhere. The currency can be sensitive to changes in the trade balance since a trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. A word of caution -- the data are subject to large monthly revisions. Therefore, it can be misleading to form opinions on the basis of one month's data.