The UK Economic Data Overview
The British economic calendar is all set to entertain the Cable traders during the dull hours of early Thursday, at 07:00 GMT with October’s GDP figures for 2020. Also increasing the importance of that time are Trade Balance and Industrial Production details for the stated period.
Having witnessed over 15% rebound of economic activities in the third quarter (Q3), market players will be interested in the monthly GDP figures to confirm the economic transition. Also highlighting the importance of the data is the national lockdown and related economic impacts.
Forecasts suggest that the UK GDP will ease to 0.4% MoM in October versus +1.1% prior while the Index of Services (3M/3M) for the same period recovered 14.2% in October.
Meanwhile, the Manufacturing Production, which makes up around 80% of total industrial production, is expected to rise from 0.2% to 0.3% MoM in October. Further, the total Industrial Production is expected to come in at 0.3% MoM as compared to the previous reading of 0.5%.
Considering the yearly figures, the Industrial Production for October is expected to have dropped by 6.5% versus -6.3% previous while the Manufacturing Production is also anticipated to have declined by 8.4% in the reported month versus -7.9% last.
Separately, the UK Goods Trade Balance will be reported at the same time and is expected to show a deficit of £9.6 billion versus a £9.348 billion deficit reported in September.
Deviation impact on GBP/USD
Readers can find FX Street’s proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined around 20-pips in deviations up to + or -2, although in some cases, if notable enough, a deviation can fuel movements over 60-70 pips.
How could affect GBP/USD?
At the press time of pre-London open on Thursday, GBP/USD fades corrective pullback from the heavy losses flashed earlier in Asia. That said, the quote marks 0.20% intraday losses while easing to 1.3370. The pair drops for the fourth day in the last five as the UK and the European Union (EU) leaders failed to break the Brexit deadlock after nearly three hours of dinner chat in Brussels. The EU Chief Ursula von der Leyen said to announce the future of Brexit talks by this Sunday.
While anticipated weakness in the scheduled data can exert additional downside pressure onto the GBP/USD prices, any surprise positive readings will have to be strong enough to wither the Brexit pessimism to recall the GBP/USD buyers. Considering the fewer chances of any Brexit developments before Sunday, the sterling is expected to remain choppy, with a slightly dovish bias until then.
Technically, repeated failures to decline below 21-day SMA help GBP/USD to pierce 10-day SMA near 1.3380 while eyeing the 1.3400 threshold. Meanwhile, a downside break below 21-day SMA level, at 1.3317 now, can recall November 13 low close to 1.3110.
About the UK Economic Data
The Gross Domestic Product released by the Office for National Statistics (ONS) is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity. Generally speaking, a rising trend has a positive effect on the GBP, while a falling trend is seen as negative (or bearish).
The Manufacturing Production released by the Office for National Statistics (ONS) measures the manufacturing output. Manufacturing Production is significant as a short-term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP. A high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or bearish).
The trade balance released by the Office for National Statistics (ONS) is a balance between exports and imports of goods. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP.
Credit: FX Street