UK trade balance boosts pound

UK trade deficit got reduced significantly in April on the back lower imports of goods, while services exports remained high.

Key highlights -

• The UK's deficit on trade in goods and services was estimated to have been £1.2 billion in April 2015, compared with £3.1 billion in March 2015.
  
  
• Deficit of goods dropped to £8.6 billion on goods compared to £10.7 billion in March. This was partially offset by an estimated surplus of £7.4 billion on services.
  
  
• Goods balance improved on back of higher exports and lower imports. Exports of goods increased by £0.7 billion, of which £0.6 billion was attributed to countries outside of the EU. Imports of goods fell by £1.5 billion, reflecting falls in the imports of miscellaneous manufactures.
  
  
• In the 3-months to April 2015, the trade in goods deficit widened by £1.0 billion to £30.0 billion. The widening reflects a £1.9 billion fall in exports and a £0.8 billion fall in imports.
  
• At the commodity level, the fall in exports in the 3-months to April 2015 oil exports fell by £1.2 billion.

Bank of England would like to pound weaker against major counterparts, especially against Euro as EU stands as its largest trading partner.

Though Bank of England (BOE) is keeping policy stable, in spite of low inflation it is unlikely to rush rate hike given low inflation and weak economic activity.

EUR/GBP which is long due a correction might move higher towards 0.75 as initial target and 0.775 as next.

However, stronger trade balance provided support to pound which is currently trading at 1. 53 against dollar.