By DailyFX – UK December Trade Balance printed a gapping 6.06 Billion deficit up from 6.01 Billion the month prior and far larger than the… … 5.6 Billion expected as the deficit with Non-EU countries grew from 3 Billion to 3.2 Billion.

On the bright side trade in oil returned to a surplus for the
first time in six months as rigs in the North Sea returned to production
after maintenance repairs. Greater North Sea oil production may
ameliorate future UK Trade Balances, but the negative impact of the
current state of affairs dragged on the pound and the unit dropped below
the 1.7400 figure in morning London session. The likelihood of
continuously large Trade deficits in UK will weigh on country's GDP
growth and many traders speculated that the pressure will eventually
force the BOE to cut rates materially in order to prop up demand.
Despite this news, BOE is expected to keep rates on hold at 4.5% at
today's MPC rate announcement scheduled for 12 GMT.

At present only the services component of the $2 Trillion UK economy is
demonstrating clear growth and many analysts fear that any slowdown in
that sector could lead to a potential recession later this year. One key
aspect of services has been housing and to that end today's Halifax
survey which showed prices declining by -0.4% last also contributed to
the gloom of cable bears and bolstered the case for further rate cuts.
Note that UK experienced an inverted yield curve as early as the summer
of last year and may be serving as analog to the US economy which is
seeing many of the same slowdown dynamics unfold presently.

In Europe, the EUR/USD spend most of the night doing absolutely nothing
as trading oscillated between 1.1990 and 1.1960. The pair has been range
bound with IFR reporting that sovereigns are on both sides of the market
keeping the EUR/USD at equilibrium. Earlier in the night the EUR/USD
strengthened during the Asia session after news a nerve agent threat to
the US Senate's Russell Office Building in Washington DC hit the wires.
The report proved to be false but the euro remained near its elevated
levels throughout the session. The ECB February bulletin reiterated that
there is an upside outlook to inflation making a rate hike in March more
than likely.

By DailyFX