The deficit in June narrowed by more than expected. At £15.46 billion, the shortfall was down from a slightly smaller revised £18.41 in May but still only a 2-month low. The improvement mainly reflected a 5.8 percent monthly slump in imports as exports edged up just 0.1 percent.

As it is, the deficit with the EU increased again, from £11.80 billion to fully £12.68 billion as exports fell 0.3 percent and imports expanded 3.2 percent. However, the worsening here was more than offset by a stronger performance with the rest of the world as exports increased 0.5 percent and imports nosedived fully 15.9 percent. As a result, the shortfall shrank from £6.62 billion to £2.77 billion, the least negative print since the middle of 2020.

The trade data remain highly volatile but on a quarterly basis, the deficit looks to be trending sideways. At £48.07 billion, the shortfall last quarter was little changed from the £49.62 billion recorded in the previous period albeit still a medium-term threat to the pound. More generally, at 39 and 46 respectively, the UK's ECDI and ECDI-P show overall economic activity is running well ahead of market forecasts.

The global goods deficit is expected to narrow slightly to £17.2 billion.

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.