GBPUSD started the week at $1.227, and has fully reversed its bullish trend. The bulls quickly took profits as the market awaited the GDP data. The price has fallen to $1.2179 during the Asian session today.
UK GPD MoM is an important economic data that measures the economic progress made in the UK within the past month. With this data, one can tell if the country is moving forward or slowing down. As many have projected, this will determine if the country is heading into a recession.
The GDP report for today has two different series, and, when put together, it will determine the direction of GBPUSD for the rest of the month.
The first report is the UK GDP MoM. This data states the total value of all the goods and services produced in the country from July 14 to August 12. The information also records the total income and expenditures made within these periods. The forecast for this data is -1.2%, while the previous record was 0.5%.
The second report on the UK GDP to be released today is the Prelim GDP QoQ. This report is released once every four months. The Prelim GDP QoQ often serves as the broadest measure of economic growth and is used to gauge the strength of the UK economy. The forecast for this data is -0.2%, while the previous record was 0.8%.
The outcome of this data will probably cause significant volatility for GBPUSD on the market today.
The UK GDP MoM witnessed a consecutive decline from March to June. The only growth was in July when the GDP MoM rose to 0.5%. However, the current GDP MoM is expected to come negative with a forecast of -1.2%. This is due to the high slowdown in the economy because of inflation.
In the US zone, the Preliminary Consumer Sentiment report released by the University of Michigan (UoM) will also greatly influence the performance of GBPUSD today. The Prelim UoM Consumer Sentiment report gives an index report on the overall consumer sentiment towards the economy. Higher reading from this report will directly impact the strength of the US dollar against the British pound. The forecast for this data is 52.5, while the previous record was 51.5.
What is the UK GDP report?
The UK Gross Domestic Product (GDP) is an important economic data that measures the economic growth recorded in the country within a given period. This data is assembled by estimating the value of goods and services produced within the given period.
Added to this, the gross domestic product (GDP) also measures the total income and expenditures of the country within the said period. Often UK GDP has released in three stages the preliminary estimate, secondary and final report.
Going by the existing records, the UK monthly GDP MoM averaged 0.16% from 1997to 2022 and reached its all-time high in June 2020 at 9.50%. The UK GDP is expected to slow to 2.8% YoY, against the previous record of 8.7% in Q1. While quarterly, the UK GDP is projected at -0.2%, after a 0.8% growth in Q1.
How does the GDP report affect GBPUSD
The GDP report affects the value of the country's currency so much. Thus a higher GDP reading shows the economy is healthy and attracts many more investors. In comparison, a lower GDP reading shows a weak economy. Which discourages investors from coming into the economy.
Thus GBPUSD will be expected to rise further should the GDP reading MoM rise above the forecast of -1.2%. The same holds for the quarterly estimates.
On the other hand, should the reading fall as low as forecasted or even lower than the forecast, the bearish trend for this pair will be expected to continue until the next support level.
Other Factors to influence GBPUSD today
Aside from the GDP report to be released today. There are a few other activities from the economic calendar which will influence the investors' sentiment towards the British pound and affect its long-term performance against the US dollar. These factors are highlighted below:
- Construction Output m/m
- Goods Trade Balance
- Index of Service 3m/3m
- Industrial Production m/m
- Manufacturing Production m/m
- Prelim Business Investment q/q
Forecast for GBPUSD ahead of the GDP report today
Brexit talks, and political jitters, analysts are currently biassed about the strength of this pair, forecasting a very low GDP from the report today. Investors are generally bearish over this pair hoping for more downside as they expect a negative reading from this report.
A negative reading from this report will likely push GBPUSD to support at $1.209. A break below it will open the way to the lower-level support at 1.194.
On the contrary, should the GDP report rise, we can expect more upside movement for GBPUSD up to the resistance at 1.228.
Traders are expected to apply proper risk management while trading this pair today.