Sterling Makes Surprise Rally Following News Of A Widened Trade Gap

By Benjamin Spier,

THE TAKEAWAY: UK visible trade balance for February comes in worse than expected at -8.772 billions pounds -> exports of cars and heavy machinery drops -> GBD/USD surprises with a rally to weekly highs

The UK trade deficit rose to its highest level in three months in February due to a decline in export of cars and heavy machinery to China, Russia, and the United States. The visible trade balance for the month came in at -8.772 billion pounds, compared to analysts’ estimates of a 7.650 billion pound deficit. January’s balance was also revised lower to -7.883 billion pounds.

Exports for February fell 3.4% while imports were unchanged. The government is looking to boost exports to bolster the British economy to counterbalance unemployment and inflation. Prime Minister David Cameron is currently leading a trade and diplomatic delegation to Japan and Southeast Asia to this end.

Although a widening trade deficit usually means a decline in value for the country’s currency, GBP gained strength against USD and JPY on news of the higher than expected trade deficit. Following the data, GBDUSD hit a weekly high of 1.5950.
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Original Article: http://www.dailyfx.com/forex/market_alert/2012/04/12/Sterling_Makes_Surprise_Rally_Following_News_of_a_Widened_Trade_Gap.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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