Pound rises after deficit falls to £6.8billion

By SIMON DUKE FOR MAILONLINE
Updated: 18:31 EST, 12 January 2010

The pound moved higher after a surprisingly large drop in Britain's trade deficit.

In a sign that manufacturers are springing back to life, the gap between imported and exported goods narrowed by £200million to £6.8billion in November, official data showed.

Sterling rose 0.3 per cent to $1.61 amid hopes that the export sector will help power the economy back into positive territory.

Resurrection: The pound moved higher amid hopes that the export sector will boost the economy

But some economists warned that the 0.1per cent rise in exports was 'disappointing' given the pound's pummelling on foreign exchange markets over the past two years.

Sterling has lost a quarter of its value since the financial crisis erupted, making British goods and services much more competitive on international markets.

There was also a worrying rise in Britain's deficit with the European Union, which is by far its biggest trading partner.

The EU shortfall shot up by £300million to £3.8billion in November - its highest level in two years.

Howard Archer, a IHS Global Insight, said: 'We're still hopeful that exports will benefit from sterling's weakness but the process is proving disappointingly slow.'