The deficit in Canada's international goods trade narrowed to C$1.047 billion in April from a revised $1.985 billion deficit in March as growth in exports outpaced imports. Forecasters in an Econoday survey looked for a deficit of C$1.5 billion.

Exports rose 2.6 percent on the month after falling 5.2 percent in March, with increases across 8 of 11 sectors. In real volume terms, exports were up 1.7%. The biggest mover was exports of energy products, up 2.7 percent on the month.

Imports rose 1.1 percent in April to offset a 1.0 percent decline in March, with increases in 6 of 11 sectors. In real volume terms, imports declined by 0.2%. Imports of motor vehicles and parts led the increase with a gain of 4.2 percent.

Regionally, the surplus with the U.S. widened to C$7.3 billion from C$6.9 billion, as exports rose 2.4 percent and imports rose 1.8 percent. Meanwhile, Canada's trade deficit with countries other than the U.S. narrowed to C$8.4 billion from C$8.9 billion.

In services, exports were flat on the month and imports were up 1.1 percent. The combined deficit in goods and services narrowed to C$2.2 billion in April from C$2.9 billion in March.

April's trade balance is seen in deficit of C$1.5 billion versus March's deficit of C$2.3 billion that was pulled lower by a sharp drop in exports.

The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Nominal data are supplied with regards to principal trading partners and product classification.

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 currency values in foreign exchange markets. This is particularly true for Canada which relies on exports and particularly those to the U.S. for growth. It should be noted that this report focuses solely on goods trade - it leaves services trade for the quarterly national accounts and balance of payments reports.

Imports indicate demand for foreign goods while exports show the demand for Canadian goods in the U.S. and elsewhere. The Canadian dollar is particularly sensitive to changes in its trade balance with the U.S. For the most part, Canada's trade balance is in surplus thanks to its exports to the U.S. Both the nominal export and import values are split into volume (real) and price components. This permits trade data to be analyzed for both changes in trade patterns as well as changing prices. This has been particularly important of late given energy price volatility and the impact on Canada's merchandise shipments. 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.

The bond market is sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.