The trade balance returned a deficit £13.99 billion in December, down from an upwardly revised £15.13 billion in November. However, the improvement was only due to exports falling by less than imports, the former down 4.5 percent on the month and the latter 5.5 percent.

The shortfall with the EU declined from £11.38 billion to £10.67 billion as exports dropped 2.2 percent and imports 3.9 percent. With the rest of the world, the deficit was £3.32 billion after £3.75 billion in November. Exports decreased 6.5 percent and imports 7.4 percent.

The December data make for a fourth quarter trade deficit of £45.81 billion. This was down slightly from the previous period's £46.56 billion and the third consecutive modest improvement. That said, both imports and exports have declined sharply over the course of the year so recent developments hardly bode well for sterling. Today's updates put the UK RPI at minus 8 and the RPI-P at 12. Neither measure is especially far away from zero but the bottom line is that the UK real economy is slightly outperforming market expectations while inflation news has been on the soft side.

The global goods deficit is put at £14.9 billion, up from November's £14.19 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.