Forex: UK Current Account deficit grows in fourth quarter

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The UK’s current account deficit expanded from last quarter’s GBP8.663 billion to GBP10.488 billion in line with expectations. This indicates that the flow of capital out of the UK exceeds incoming transfers. The depreciation in Sterling should have narrowed the trade gap. However, this has not happened, mainly due to increased payments to EU institutions.

At the same time, the Office of National Statistics published GDP data for the fourth quarter which showed a decline from prior figures, confirming the slow progress in the UK economy’s growth, prompting the Bank of England to delay raising interest rates for the next six months.

Upon release of the news, GBPUSD fell some 17 pips within 5 minutes from 1.6024 to 1.6008. EURGBP gained over 8 pips at the same time from 0.8803 to 0.8811.