Question: Every month, the U.S. trade deficit figures are announced. The foreign exchange traders often react to this announcement and even attempt to forecast the figures before they are announced.
a. Why do you think the trade deficit announcement sometimes has such an impact on foreign exchange trading?
b. In some period, foreign exchagne traders do not respond to a trade deficit announcement, even when the announced trade deficit is very large. Offer an explanation for such a lack of response.