The UK Economic Data Overview
Having witnessed a contraction of 0.2% in the economic activities during December 2021, market players will be interested in Januarys monthly GDP figures to confirm the recently hawkish bias of the Bank of England (BOE).
Forecasts suggest that the UK GDP will reverse the previous drop with 0.2% MoM in January. GBP/USD traders also await the Index of Services (3M/3M) for the same period, likely to remain unchanged with 1.2% growth, for further insight.
Meanwhile, Manufacturing Production, which makes up around 80% of total industrial production, is expected to remains unchanged with 0.2% MoM in January. However, the total Industrial Production is expected to ease to 0.1% versus 0.3% previous growth.
Considering the yearly figures, the Industrial Production for January is expected to have rallied to 1.9% versus 0.4% previous while the Manufacturing Production is also anticipated to have rose to 3.1% in the reported month versus 1.3% the last.
Separately, the UK Goods Trade Balance will be reported at the same time and is expected to show a deficit of £12.6 billion versus a £12.534 billion deficit reported in December 2021.
How could affect GBP/USD？
GBP/USD licks its wounds around a 16-month low ahead of the key UK data releases. The cable pairs latest rebound to 1.3090 could be linked to the USD pullback amid mixed concerns in the market.
As the BOE has already played its cards and the Fed now has an upper hand over every other major central bank, as far as the market‘s preparations for a hawkish move is concerned, the GBP/USD pair has a further downside to track. However, extremely positive data may help redirect the market’s attention to the “Old Lady” and can help the cable to extend the latest rebound from a multi-day low.
Ahead of the event, Westpac said, “Volatility in the trade balance will likely be present in January as the UK continues to navigate COVID-19 and Brexit uncertainties (market forecast: -£2.4 billion). January GDP is seen up just 0.1% month.”
Technically, GBP/USD bears remain hopeful until the quote stays decisively above December 2021 low surrounding 1.3160.
Key notes
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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.
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