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GBP/USD Little Changed as UK Trade Deficit Narrowed Post-Referendum

GBP/USD Little Changed as UK Trade Deficit Narrowed Post-Referendum

Oded Shimoni, Junior Currency Analyst

Talking Points:

- Visible Trade Balance came at -£11.764B in July, below expectation, but above prior -£12.920B

- Total Trade Balance printed -£4.502B, below expectations as well

- British Pound was little changed, and the pair still trades below 1.3350

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The British Pound was little changed versus other major currencies (at the time this report was written) after today’s UK trade balance data printed worse than forecasted numbers.

The Sterling reaction was mixed versus other majors, trading slightly higher versus the US Dollar and the Euro but had very limited response versus the other majors for an overall subdued response.

It’s important to note that the figures represent the month of July, meaning a full month post the Brexit referendum vote.

Visible trade balance, which does not record intangibles like services (reporting only on physical goods) came at -£11.764B in December, below the -£11.650B expected by economists, but above prior revised reading of -£12.920B, indicating that the deficit narrowed in July.

Looking into the report, the Office for National Statistics said that this narrowing reflected an increase in exports of £0.8 billion to £24.8 billion and a decrease in imports of £0.3 billion to £36.6 billion.

This narrowing might be a result of the lower exchange rate in the aftermath of the Brexit vote, but is interestingly below expectations- potentially implying that economists were slightly overestimating the devaluation effects.

Total trade balance printed -£4.502B versus -£4.200B expected, with a revised -£5.573B prior figure.

The non EU trade balance, which is a gauge of Britain's trade with countries outside of Europe, came at -£4.188B versus the -£3.600B expected, with a revised prior reading of -£4.701B.

At the time of the release, Construction Output data and BOE/TNS inflation survey crossed the wires as well, with construction output beating expectations after several months of declines.

The fact that the trade balance indeed saw a narrowing, coupled by higher than expected construction output data might have mitigated a response to the lower than expected trade balance figures for an overall muted reaction by the British Pound.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 43.0% of traders are long the GBP/USD at the time of writing.

You can find more info about the DailyFX SSI indicator here.

GBP/USD 5-Minute Chart: September 9, 2016

--- Written by Oded Shimoni, Junior Currency Analyst for

To contact Oded Shimoni, e-mail

Follow him on Twitter at @OdedShimoni

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.