Australia's goods trade surplus narrowed from a revised A$5.156 billion in January to A$2.968 billion in February, well below the consensus forecast of A$5.4 billion. In seasonally adjusted terms, the value of exports fell 3.6 percent on the month in February after increasing 0.8 percent in January, with exports falling 8.1 percent on the year after a previous decline of 4.6 percent. Imports rose 1.6 percent on the month after falling 0.4 percent previously, with year-over-year growth weakening from an increase of 7.4 percent to a fall of 0.2 percent.

The consensus sees the surplus narrowing marginally to A$5.4 billion in February from A$5.62 in January as freight volumes point to slightly lower exports after a strong showing in January.

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.