U.K.'s sterling halted its recent rally against its major rivals in European trading on Wednesday following a report showed that the nation's trade gap unexpectedly widened in November. The pound eased from a 4-week high against the dollar.
The UK's seasonally adjusted trade deficit was GBP 8.7 billion in November compared with the deficit of GBP 8.6 billion in October, data from the Office for National Statistics showed today. The expected shortfall was GBP 8.35 billion.
Total exports rose by 4.1% to GBP 23.6 billion and total imports advanced by 3.4% to GBP 32.4 billion.
Another report released earlier in the day showed that shop price inflation in the UK rose in December due to a pick up in non-food prices. Shop prices increased 2.1% year-on-year, up from a 2% increase in the previous month, reports said citing the British Retail Consortium and Nielsen.
Traders are now looking forward to the Bank of England's rate decision on Thursday. Analysts expect the central bank to maintain its GBP 200 billion asset purchase programme and the 0.5 interest rate unchanged.
The pound that advanced to a 4-week high of 1.5683 against the US dollar around 4:25 am ET reversed direction shortly. The pound is presently quoted at 1.5633 against the greenback, compared to 1.560 hit late New York Tuesday.
The sterling that recovered its Asian session losses against the Japanese yen at the beginning of Wednesday's European deals eased after hitting as high as 130.21 around 4:25 am ET. The pound-yen pair is presently trading near yesterday's closing value of 129.86.
Japan posted a current account surplus of 926.2 billion yen in November, the Ministry of Finance said today. That was lower than the forecasts for a surplus of 972.5 billion yen after showing a surplus of 1.436 trillion yen in October.
The November figure marked a decline of 15.7% on year, again shy of estimates for an 11.8% annual contraction following the 2.9% increase in the previous month.
Japan saw a trade surplus of 259.7 billion yen, below forecasts for a surplus of 297.7 billion yen after posting a surplus of 912.9 billion yen a month earlier.
Against the Swiss franc, the pound pared gains after hitting a 1-month high of 1.5273 in early European trading on Wednesday. The pound-franc pair that finished yesterday's deals at 1.5192 is presently quoted at 1.5208.
The pound edged lower to 0.8340 against the euro around 5:25 am ET and this may be compared to yesterday's close of 0.8319. If the pound weakens further, 0.8410 is seen as the next likely target level. The euro-pound pair is presently quoted at 0.8333.
The German economy expanded strongly in 2010, figures from the Federal Statistical Office showed today. The increase in the price-adjusted gross domestic product was 3.6%, the largest since German reunification, the statistical office said.
In 2009, GDP had slumped heavily by 4.7%. Upon calendar adjustment, the GDP growth rate was 3.5% in 2010 compared to prior year's 4.7% contraction.
French current account, Italian and euro-zone industrial production data-all for November, which were released today likely influenced the euro.
Investors are cautious ahead of today's Portugal bond auction and tomorrow's European Central Bank interest rate decision.
The U.S. import and export prices indexes for December and the Federal Reserve's Beige Book are slated for release in the New York session.
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