Pound Halts Longest Decline Since January as Trade Gap Narrows

  • Sterling underpinned by international support for Remain vote
  • Currency remains worst performer among G-10 nations this year

The pound advanced, halting the longest losing streak against the dollar since January, as a report showed the trade deficit was not as wide as forecast by analysts.

Sterling was also underpinned by increasing international support for the British campaign to remain in the European Union before a referendum on its membership next month. The total trade deficit narrowed to 3.8 billion pounds ($5.5 billion) in March from a revised 4.3 billion pounds in February, and compared with a shortfall of 4.2 billion predicted by analysts.

“The market appeared to be cutting down on sterling short positions, and deficit data that’s not as bad as expected by the market helped as a catalyst,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “There is also strong support for the Remain camp from international leaders and senior officials. It doesn’t get any bigger than that. Some people might be unwinding their Brexit hedge.”

Five former NATO secretaries general and 13 former U.S. foreign, defense and security chiefs said a U.K. withdrawal from the European Union would weaken both Britain and the bloc, urging against backing for a so-called Brexit when voters head to the polls in a referendum on June 23.

The pound rose 0.4 percent to $1.4459 as of 3:51 p.m. in London, having declined 1.8 percent in the past five days. Sterling strengthened 0.2 percent to 78.84 pence per euro.

Trade Balance

While the March data showed improvement in Britain’s trade balance, the first quarter figures underlined the currency’s vulnerability to external shock. The trade gap widened to 13.3 billion pounds, the most since the start of 2008, from 12.2 billion pounds in the fourth quarter of 2015. The shortfall in goods alone was the widest since records began in 1998.

The rebound in the past month helped to pare sterling’s losses this year. Still, the pound is the worst performer this year among currencies of Group-of-10 nations as a soft patch in the economy and concern about its possible exit from the trading bloc weighed on sentiment.

U.K. 10-year gilts were little changed after rising for the past eight days, leaving yields at 1.41 percent. Yields climbed earlier before the Debt Management Office sold 700 million pounds index-linked bonds maturing in March 2058 with an average real yield of minus 0.896 percent.

The real yield on the index-linked gilt maturing in March 2058 was little changed at minus 0.889 percent.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE