Australia's goods trade surplus narrowed from a revised A$6.792 billion in November to A$5.085 billion in December, below the consensus forecast of A$6.75 billion. In seasonally adjusted terms, the value of exports rose 1.1 percent on the month in December after an increase of 4.2 percent in November, with exports falling 1.6 percent on the yar after a previous decline of 5.8 percent. Imports rose 5.9 percent on the after advancing 1.4 percent previously, with year-over-year growth accelerating from 1.9 percent to 13.2 percent.

Forecasters expect the merchandise trade balance in a surplus of A$6.75 billion in December after widening to A$7.079 billion in November from A$5.67 in October.

The Goods Trade Balance measures the difference between imports and exports of tangible goods. 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.