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Sterling Rises as UK Trade Deficit Drops to Lowest Level of 2012

Sterling Rises as UK Trade Deficit Drops to Lowest Level of 2012

Benjamin Spier, Technical Strategist

THE TAKEAWAY: UK trade balance for July at -1.157 billion Pounds, lower than expected -> Demand outside of the EU fuels export demand -> Sterling tests 4-month highs

The UK trade deficit dropped to the lowest level of 2012 as exports increased 9.3% and imports fell 2.1% in July. The trade balance totaled -1.517 billion British Pounds, higher then expectations for a -3.2 billion balance and above June’s revised -4.333 billion Pound trade balance.

The value of imports fell to the lowest level since February, according to the UK Office for National Statistics. UK exports to outside the EU increased by 2 billion Pounds and 17.3% in July, while imports from outside the EU slid 4.1%. The increase in total exports was led by oil, chemicals and consumer goods.

The rise in exports, which was accented by demand outside of the EU, is good news for the UK economy, which has contracted for the past 3-quarters. That’s why the British pound rose against the US dollar following the release of the trade balance and is now testing a 4-month high above 1.6030. The key 1.6000 level could provide support, and resistance could come in at 1.6057, by the 76.4% retracement of May’s decline.

GBPUSD 15-minute: September 11, 2012

Sterling_Rises_as_UK_Trade_Deficit_Drops_to_Lowest_Level_of_2012_body_gbpusd.png, Sterling Rises as UK Trade Deficit Drops to Lowest Level of 2012

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