British Pound Down Despite Improvement in UK Trade Deficit, Rise in Producer Prices

The British pound took a heavy hit once again on Friday despite mostly positive data. The UK’s visible trade deficit fell to the lowest level in more than three years, narrowing to 6.24 billion pounds in August from 6.431 billion in July, but the shift had more to do with a drop in imports, as exports also fell, indicating the demand remains weak both domestically and abroad. Meanwhile, the producer price index (PPI) that measures input prices slumped 0.5 percent in September, but a 0.5 percent increase in PPI output suggests that businesses have a bit more pricing power these days and may be able to make up for some lost profit margins. Furthermore, the data creates some potential for surprising strong results for the consumer price index (CPI) next week.