When are the UK data releases and how could they affect GBP/USD?

The UK Economic Data Overview

The British economic calendar is all set to entertain the cable traders during the dull hours of early Friday, at 07:00 GMT with January GDP figures for 2021. Also increasing the importance of that time are Trade Balance and Industrial Production details for the stated period.

Having witnessed a 1.0% rebound of economic activities in the fourth quarter (Q4), 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 drop back to -4.9% MoM in January versus +1.2% prior. GBP/USD traders also eye Index of Services (3M/3M) for the same period, +0.6% prior, for further insight.

Meanwhile, Manufacturing Production, which makes up around 80% of total industrial production, is expected to drop from +0.3% to -0.8% MoM in January. Further, the total Industrial Production is expected to come in at -0.6% MoM versus the previous reading of 0.2%.

Considering the yearly figures, the Industrial Production for January is expected to have dropped by 4.0% versus -3.3% previous while the Manufacturing Production is also anticipated to have declined by 3.6% in the reported month versus -2.5% last.

Separately, the UK Goods Trade Balance will be reported at the same time and is expected to show a deficit of £12.5 billion versus a £14.315 billion deficit reported in December.

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?

GBP/USD eases from the weekly top of 1.4005, to currently down 0.09% intraday around 1.3980, while heading into Friday’s London open. While broad US dollar bounce after the three-day downtrend can be traced as the key behind the cable’s pullback moves, vaccine news offered extra filters to the moves. While Novavax signaled the ability to cure the UK covid variant, doubts over AstraZeneca and its ability to deliver promised vaccine jabs to the EU seem to weigh on the mood. It should be noted that US President Joe Biden’s worries over the US employment and a lack of clear signals for the recently debated $2.5 trillion infrastructure stimulus also dragged the quote.

Looking forward, chatters over the manufacturing problem in the UK, mainly due to the Brexit and lockdowns, will be magnified based upon today’s data. Should that happen, the GBP/USD prices will have extra downside room following the release. Alternatively, positive readings may have to recall the market optimists to favor the GBP/USD upside.

Technically, a two-week-old falling trend line guards the quote’s immediate upside around 1.4000. However, buyers are likely to remain hopeful unless witnessing a daily closing below the 50-day SMA level of 1.3787.

With that in mind, TD Securities said,

We're looking for a steep -6.5% m/m contraction in January GDP, compared to a consensus of -4.9%. The largest drags should come from wholesale/retail, given the much larger than expected -8.2% drop in retail sales, as well as education, with schools closed during the lockdown. But we do look for declines across most sectors, with mobility data also suggesting a sharp slowdown in overall activity during the month.

Key notes

GBP/USD Price Analysis: Cable retraces 50% of the recent drop 

GBP/USD Forecast: Bulls poised to challenge the 1.4000 mark

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.