News Column

Pound Falls As UK Trade Deficit Widens More-than-expected

July 10, 2014

BRUSSELS (Alliance News) - The British currency weakened against the other major currencies in the early European session on Thursday following the release of a report showing wider-than-expected U.K trade deficit in May.

The data from the Office for National Statistics showed that the UK visible trade deficit widened in May as the increase in imports exceeded the growth in exports.

The visible trade deficit widened to GBP 9.2 billion from GBP 8.8 billion in April. Economists had forecast a shortfall of GBP 8.75 billion.

Exports of goods grew only 0.6% from April to GBP 24.1 billion. At the same time, imports of goods climbed 1.7% to GBP 33.3 billion, reflecting a rise in demand for finished manufactured goods.

The deficit with EU nations widened to GBP 5.2 billion from GBP 4.9 billion and that with non-EU nations rose to GBP 4 billion from GBP 3.9 billion.

Including services, the total trade deficit widened to GBP 2.4 billion in May from GBP 2.1 billion in the previous month. Meanwhile, the surplus on trade in services remained unchanged at GBP 6.8 billion in May.

Traders await the Bank of England's monetary policy decision, due shortly. The interest rates are seen on hold at 0.50% and asset purchase program at 375 billion pounds.

Pulling away from early highs of 0.7948 against the euro and 1.5287 against the Swiss franc, the pound slipped to 1-week lows of 0.7967 and 1.5245, respectively. If the pound extends its downtrend, it is likely to find support around 0.80 against the euro and 1.51 against the franc.

The pound which ended yesterday's deals at 1.7154 against the greenback weakened to 1.7109. Continuation of bearish trend may lead the pound to a support around the 1.70 mark.

Moving away from an early multi-day high of 174.40 against the yen, the sterling slipped to a 9-day low of 173.52. On the downside, the pound may find the support level near the 172.20 region.

The data from the Cabinet Office showed that Japan consumer confidence index rose to 41.1 in June from 39.3 in May, with all the sub-indices contributing positively to the overall index. This marked the highest level of confidence since December 2013.

In the New York session, US weekly jobless claims for the week ended July 5 are due to be released. At 1:15 pm ET, Federal Reserve Bank of Kansas City President Esther George will deliver a speech on the US economy and monetary policy before a business and community leaders luncheon hosted by the Federal Reserve Bank of Kansas City'sOklahoma City Branch in Shawnee.

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Source: Alliance News

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