GBP/USD edges lower as UK trade balance deficit widens unexpectedly

British pound traded lower against the US dollar on Friday, after a report showed that the deficit on United Kingdoms trade balance widened unexpectedly in September, as concerns arose that this larger deficit could have a negative impact on growth during the third quarter.

GBP/USD slipped to a session low at 1.6060 at 9:50 GMT, after which consolidation followed at 1.6077, still down 0.12% for the day. Support was likely to be found at November 5th low, 1.5950, while resistance was to be encountered at October 28th high, 1.6208.

UK economy probably expanded at a lesser pace than initially estimated during the third quarter of the year, after earlier on Friday it became clear that nations trade balance deficit widened and construction activity slowed down. Preliminary data pointed that UK Gross Domestic Product probably rose 0.8% during Q3 compared to Q2, or the strongest pace in three years. After the announcement of data regarding countrys deficit, however, it is suggested that the final GDP figure might be revised down. The official report is scheduled for release on November 27th. According to an official from the Office for National Statistics (ONS), it was too soon to assess the possible impact by this larger deficit upon economic growth, but yet, such an influence might rather be negative. The ONS did not say how considerable the slow down in growth might be. In September the deficit figure widened to 9.816 billion GBP from the revised up deficit of 9.557 billion GBP in August. Expectations pointed a deficit at the amount of 9.150 billion GBP. Export of goods towards other European countries registered a record drop in the month of September.

United Kingdoms deficit, a result of trade with countries outside the Euro zone, contracted to 3.845 billion GBP in September from a revised up deficit of 4.324 billion GBP in August. Experts had anticipated that the deficit figure will shrink at a lesser pace, to reach 4.000 billion GBP.

In addition, according to data by the real-estate researcher Acadametrics and LSL Property Services Plc, house prices in the United Kingdom rose 0.6% in October compared to September to reach an average value of 237 161 GBP.

Meanwhile, yesterday the sterling gained ground against the euro, following ECBs unexpected decision to lower its benchmark rate to a new record low level of 0.25%.

The pound showed little reaction against the US dollar, after the Monetary Policy Committee at Bank of England (BoE) decided to leave borrowing costs unchanged at the current record low level of 0.50% and the size of monetary stimulus at 375 billion GBP per month, meeting expectations. The central bank has pledged that it will keep the base interest rate at a record low level until the rate of unemployment in the country falls below 7%. According to most recent data, currently the rate stays at 7.7%.

Bank of England Governor Mark Carney is expected to present new economic projections next week, while a number of institutions, including Goldman Sachs Group Inc., project that the central bank will probably revise up its outlook. “The momentum of the economy has built up more rapidly than the MPC forecast in August,” Jonathan Pryor, head of foreign-exchange dealing at Investec Corporate Treasury wrote in a note to clients, cited by Bloomberg. The upcoming forecasts “will be monitored with serious interest”, he also wrote.

Lastly, the yield on UK benchmark 10-year gilts climbed two basis points, or 0.02 percentage point, to reach 2.69%, after reaching 2.71% yesterday.

Elsewhere, the pound was lower against the euro, with EUR/GBP cross gaining 0.16% on a daily basis to trade at 0.8352 at 12:31 GMT. It became clear that Germanys trade surplus rose to a record level in September, as exports grew 1.7% to 92.8 billion EUR compared to a month ago, while imports fell 1.9% to reach 73.9 billion EUR. Nations seasonally adjusted trade surplus climbed to the record 18.8 billion EUR in comparison with the revised up surplus of 15.8 billion EUR in August. Without seasonal adjustments, Germanys surplus rose to 20.4 billion EUR in September from a revised up surplus of 13.3 billion EUR in August.

GBP/JPY pair was losing 0.11% to trade at 157.76 at 12:32 GMT.