Taking a Fundamental Approach to Forex Trading

Trading the Sterling with the UK Trade Balance

UK trade balance is a key economic indicator published monthly in London by the ONS, The Office of National Statistics. Calculated in billions of pounds, this piece of data represents the difference between the net value of exports and imports in UK for a given month. The economic release measures the UK trade activity with the world in three main categories (Goods only, Services only, Goods and Services). One sector may suffer from a deficit as the value of imports exceeds the value of exports; while another sector may enjoy a surplus as the value of exports exceeds the value of imports.

UK MAIN EXPORTS COMMIDITES	UK MAIN EXPORTS PARNERS
Manufactured goods	US 13.9%
Fuels	Germany 10.9%
Chemicals	France 10.4%
Food	Ireland

UK MAIN IMPORTS COMMIDITES	UK MAIN IMPORTS PARTNERS
Manufactured goods	Germany 13.9%
Machinery	US 8.9%
Fuels	France 6.9%
Food stuff	Netherlands 6.6%

Impact on the Sterling
UK trade balance is a direct input for the balance of payment. As a result, this monthly economic figure plays a significant role in speculating the potential movement of the Sterling. Although not in big numbers, deficit has gained the upper hand in the UK for the last ten years. For that, currency traders should follow the monthly percent of change in the deficit. A "widening" deficit would cause a slide in the Sterling while a "shrinking" deficit would cause a pound rally.