When are the UK data releases and how could they affect GBP/USD?
The UK Economic Data Overview
The United Kingdom (UK) docket has the monthly Gross Domestic Product (GDP) to be released by the Office for National Statistics (ONS) on Friday, alongside the Trade Balance and Industrial Production, all of which will be published later this session at 06:00 GMT.
The UK GDP is expected to stagnate in July. Meanwhile, the Manufacturing Production, which makes up around 80% of total Industrial Production, is expected to come in at 0% month-over-month (MoM) in July, following a 0.5% recorded in June. Meanwhile, the Industrial Production is expected to come in at 0% MoM in July as compared to the previous reading of 0.7%.
On an annualized basis, the Industrial Production for July is expected to have risen to 1.1% versus 0.2 in % previous month, while the Manufacturing Output is also anticipated to have accelerated to 1.6% in the reported month versus 0% last.
Separately, the consensus for the UK Total Trade Balance is unknown for July, following a deficit of £5.015 billion last month.
How could affect GBP/USD?
Today's macro releases could be overshadowed as traders anticipate a policy divergence between the Bank of England and other major central banks.
The GBP/USD pair may appreciate as the BoE is unlikely to cut interest rates in the near term as stubborn inflationary pressures in the United Kingdom (UK).
Akhtar Faruqui, FXStreet’s Analyst notes: The GBP/USD pair may target its immediate barrier at the three-month high of 1.3594, aligned with the psychological level of 1.3600. A break above this crucial resistance zone would support the pair to approach the 1.3788, the highest since October 2021. On the downside, the primary support lies at the nine-day Exponential Moving Average (EMA) of 1.3524, followed by the 50-day EMA at 1.3475. A break below these levels would weaken the short- and medium-term price momentum and put downward pressure on the pair to navigate the region around the seven-week low of 1.3253.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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