FX Headlines: U.K.'s Trade Deficit Widens in December, Forex Traders Countdown to the BoE Rate Decision
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GBPUSD: The trade deficit in the U.K. widened in December to 9.2 billion pounds from 8.5 billion pounds the month prior amid economists’ forecasts of 8.6 billion pounds. Taking a look at the breakdown of the report, exports advanced 1.5 percent, while imports jumped 3.5 percent. Looking ahead, the region’s largest spending cuts since the Second World War is expected to reduce the demand for imports, while exports will also remain subdued as the recovery in the 17 member euro area comes under pressure due to the increase in the value added tax measures within the bloc.
The GBPUSD is relatively unchanged ahead of the Bank of England interest rate decision. As of late, traders are pricing in a 17 percent chance that the central bank will hike rates twenty five basis points. Despite the recent optimism in borrowing costs expectations, the central bank will likely hold its key overnight interest rate and asset purchase target at 0.50 percent and 200 billion pounds respectively as predictions of weak growth discourage policy makers from tightening monetary policy.
Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.