Ratings & Trade Pressures Pound

• UK Trade Deficit moves to widest since August 08

• Fitch again warns of UK sovereign debt downgrade

• Gordon Brown due to speak today on economy

• UK GDP estimate due from NIESR

YUK! The UK’s trade deficit with other nations hit its widest level since August 2008 as exports fell massively. The figure jumped from £2.6bn in January to a whopping £3.8bn in February which hits hopes that the recovery here in the UK would be driven by the export side of things.

We, alongside everyone else, were expecting a good figure: with pound still weak against the currencies of our main export markets (Europe and the US) our exports are that much cheaper and more attractive to those that buy them. Or so we thought . So like a typical Brit I’m going to blame it on the weather. Factories may have seen work slow due to the inclement conditions while imports were relatively unhindered. The deficit does stand against data from the CBI that shows that export orders are at an 18 month high.

This was not the only GBP negative from the markets yesterday. The ratings agency Fitch was particularly busy issuing warnings over the credit ratings of Spain, Portugal, France and indeed the UK. They were fairly scathing in their analysis of the UK but there was little new insight.

Needless to say, with this data casting doubts on the strength of the UK recovery pound was whacked hard in trade yesterday. We are still only just above the lows that we saw last Monday against USD, EUR and JPY and have made record lows against the AUD and NZD. Sterling is in a bad place.

Gordon Brown is due to speak in London and, according to the BBC, is “set to say he has guided the economy through a “storm” over the past 18 months and is best placed to secure its recovery”. I don’t know he’s kidding but the likely mudslinging by the other parties in the wake of the assertions will only cause further uncertainty over the economy. Sterling is likely to weaken as a result. Labour are also due to announce the date of this year’s budget, probably the 24th March.

Data today includes the NIESR’s estimate of UK GDP for the month of Feb; the consensus estimate is 0.4%, 0.1% higher than the latest figure for the 4th quarter of 2009. We also have UK industrial and Manufacturing Production at 09.30 which should be strong given the recent PMI results. The euro is mixed this morning due to German CPI rising to 0.4% against a 0.2% estimate although German Trade Balance was a full EUR8bn worse than expected.

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