UK Trade Gap Narrows Supporting The Pound, While Euro Investors Await Key Announcements

Modified: Tuesday, 11 September 2012 15:13 BST - Written by Minesh Chaudhari

STORY LINK UK Trade Gap Narrows Supporting The Pound, While Euro Investors Await Key Announcements

Today has brought a quiet-ish day for global data releases. The main events have come in the form of trade figures for July, released on either side of the Atlantic. The UK led the way, with numbers which revealed that the nation’s domestic trade deficit had contracted to £1.5bn in July – significantly down from June’s £4.3bn counterpart figure. Exports increased by a month-on-month 9%, while imports were slightly down, but still printed at a mammoth £32.9bn. The fact that Britain’s trade gap is narrowing at a time when Sterling has been strengthening against the currency of the UK’s primary trading partner – the euro – bodes well for UK PLC’s prospects moving forward.

Meanwhile, the US trade numbers made slightly less comfortable reading for investors holding Greenback-denominated assets. America’s trade gap expanded, according to the most recent snapshot of the US economy, also taken in July. However, this development was not unexpected, so subsequent price action for the US Dollar was relatively calm. The increase in America’s deficit was largely due to a sharp downward move in the level of US exports, providing cause for concern regarding the general health of the global economy.

Elsewhere, the next 24hrs could prove to be highly important for the euro, with the European Union due to make an announcement of closing harmony between member states’ retail banks in the early part of tomorrow’s morning session. Things could get even more interesting later in the day, when the German Constitutional Court announces its decision on Germany’s continued participation in the European Stability Mechanism. A negative verdict would trigger heavy selling pressure on the single currency. Watch this space.

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