The deficit on overall goods trade widened from a smaller revised £16.09 billion in January to a much as expected £17.53 billion in February. The deterioration reflected a 6.3 percent monthly drop in exports that easily more than offset a 1.4 percent decline in imports.

Regionally, the shortfall with the EU rose from £9.52 billion to £11.02 billion as exports contracted a monthly 6.8 percent while imports expanded 1.5 percent. With the rest of the world, the red ink was little changed at £6.52 billion as exports dropped 5.8 percent and imports 4.5 percent.

The headline data continue to be extremely volatile on the back of sharp swings in oil prices and highly erratic moves in precious metals. Excluding the latter, the deficit stood at £19.03 billion, up from £18.65 billion but still well down on the £21.3 billion average seen in the fourth quarter of last year. Even so, the broad trend remains fairly flat and the deficit remains large enough to pose a medium-term threat to the pound. The UK's ECDI now stands at minus 4 and the ECDI-P at minus 13, both values indicating that overall economic activity is also falling marginally short of market expectations.

The merchandise trade deficit is seen holding steady at £17.8 billion in February versus a £17.86 billion deficit in January.

The merchandise trade balance measures the difference between imports and exports of goods. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade and can offer a guide to an economy's competitiveness. Data are supplied by over 30 sources including several administrative sources, HM Revenue and Customs (HMRC) being the largest.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect currency values in foreign exchange markets.

Imports indicate demand for foreign goods and services in the UK. Exports show the demand for UK goods in countries overseas. The pound sterling can be particularly sensitive to changes in the trade deficit run by the United Kingdom, since the trade shortfalls create greater net demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country.

The UK's trade balance is particularly susceptible to swings in the oil account and so within the overall goods balance, financial markets will normally focus on the balance excluding oil and other erratic items.