When are the UK data release and how could they affect GBP/USD?
UK Jobs Report Overview
The United Kingdom (UK) docket has the Gross Domestic Product (GDP) and Industrial Production data for August to be released by the Office for National Statistics (ONS) on Thursday, later this session at 06:00 GMT.
UK Gross Domestic Product is expected to increase by 0.1% month-over-month (MoM) in August, against the 0% reading in July.
UK Industrial Production may rise 0.2% MoM in August, after declining 0.9% in July. Meanwhile, the annual production could fall 0.6% in the same month, following a 0.1% increase prior.
How could UK GDP, Industrial Production data affect GBP/USD?
GBP/USD may extend its gains if the UK economy shows expansion in August, which could ease the odds of the Bank of England (BoE) further rate cuts in the remaining year. Any contraction could lead to an increase in the likelihood of easing monetary policy, following mixed UK labor market figures for the three months ending in August. Traders will watch UK Industrial Production closely, a key gauge of manufacturing strength, with Manufacturing Production data due later today. Money markets are pricing in a 46-basis-point (bps) interest rate reduction by the BoE in the remaining two monetary policy meetings this year, per Reuters.
The GBP/USD pair also draws support as the US Dollar (USD) struggles amid market caution, driven by the escalating United States (US)-China trade tensions, the world’s two largest economies. US President Donald Trump said on Wednesday that he saw the US as in a trade war with China, even as Treasury Secretary Scott Bessent proposed a longer pause on high tariffs on Chinese goods to resolve a conflict over critical minerals.
Technically, the GBP/USD pair trades around 1.3420 at the time of writing, with the immediate barrier appearing at the 50-day Exponential Moving Average (EMA) of 1.3451. A break above this level would support the pair to explore the region around the three-month high of 1.3726, reached on September 17. On the downside, the immediate support lies at the psychological level of 1.3400, followed by the nine-day EMA at 1.3390. Further decline below this confluence support zone would prompt the pair to test the two-month low of 1.3248.
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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