UK Economic Data Is Weighing On The Pound (FXB)

The economic data in the UK today does not paint a pretty picture. The RICS February house prices (with the main index falling to a much weaker than expected 17% from 31%) was released overnight in the UK and was negative news to digest this morning.

The January trade balance data was highly disappointing, with the main deficit widening to a much worse than expected £7.98bn (vs -£7bn previously and vs -£7bn expected) while the non-EU trade gap widened to -£3.8bn (from -£2.6bn). This was the worse trade performance since August 2008 and resulted from a 6.7% monthly drop in exports while imports were down 1.6%. The slump in exports is disappointing at a time of sterling weakness but one should not forget that the UK main trading partner (the euro zone) recovery is extremely sluggish and a weaker currency will do little in the near-term if external demand is very weak to start with.

Coupled with the negative adverse effects that the poor weather recorded in Q1 will have on GDP growth, the highly disappointing trade figures underline a further drag on economic activity.

The pound (NYSE: FXB) is under pressure this morning and could retest the recent lows.