Release Explanation: It measures the country’s exports minus its imports and is the largest component of a country’s balance of payments. An increase or decrease in the Trade Balance will help determine the future economic outlook and growth numbers in a region. The trade balance can influence all aspects of an economy as it is the way that region balances its books.

Trade Desk Thoughts: The U.K. deficit shrank in December to £7.4 billion, more than market expected. The previous number was also revised lower, from a deficit of £8.3 billion to £8.1 billion.

The surplus on trade in services was £3.8 billion, compared with a surplus of £4.1 in November. Exports rose by less than £0.1 billion, and imports fell by £0.7 billion, largely reflecting a fall in imports from non-EU countries.

The trade balance release shows that consumption is slowing in the U.K, and at the same time, exporters have a hard time opening new trading routes, despite the much weaker pound. Excluding volatile items, exports rose only 1%. Imports fell 2% in December, from one month earlier.

Forex Technical Reaction: The pound traded very volatile after the release, making a 50 pip candle. The pair moved 100 pips lower in the overnight sessions, paring the gains seen one day earlier. Today is the first time that the pound has moved lower in the last four days.