The global deficit on goods unexpectedly widened in June. From a larger revised £18.59 billion in May, the shortfall rose to £18.89 billion, only a 2-month high but well above most recent readings and nearly £2 billion more than the market consensus.

The headline deterioration masked a 7.6 percent monthly jump in exports and reflected instead a 5.3 percent increase in imports. The deficit with the EU widened from £10.95 billion to £11.44 billion as a 7.4 percent spike in imports more than offset a 9.6 percent bounce in exports. However, with the rest of the world, the shortfall narrowed slightly from £7.65 billion to £7.46 billion, with exports up 5.7 percent and imports 3.0 percent.

The monthly trade data remain as volatile as ever but the June update warns that the underlying trend is deteriorating. Indeed, at £57.91 billion, the second quarter deficit was up nearly 39 percent versus the first quarter and the largest since the second quarter of 2022. Foreign exchange markets continue to pay only scant attention to these reports but the magnitude of the red ink cannot be good news for the pound's medium-term outlook. Today's data put the UK RPI at minus 15 and the RPI-P at minus 4. In general, economic activity is falling slightly short of market forecasts.

The global goods shortfall is put at £17.0 billion, an improvement on May's hefty £17.92 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.