UK GDP Preview: Buy the rumor, sell the fact? BOE's bullish stance may backfire

  • The UK is expected to report a relatively modest 0.5% growth rate in the last quarter of 2020. 
  • Investors likely anticipate a more robust figure following upbeat comments by the BOE.
  • Elevated real estimates and a recent GBP/USD rally point to a downside scenario.

Another Friday, another "buy the rumor, sell the fact" awaits GBP/USD traders – but this time to the downside. Investors raised their expectations for US Nonfarm Payrolls following a string of upbeat leading indicators – and they fled the dollar when the figure dropped and only met original estimates. The same scenario is on the cards for GBP/USD and the UK's Gross Domestic Product statistics for the fourth quarter of 2020. 

FXStreet's Economic Calendar is pointing to a quarterly increase of 0.5% in GDP – a decent growth rate in pre-pandemic times, but only a modest change in output as the economy struggles to catch up. These estimates are likely based on the UK's on/off lockdowns during the turbulent autumn months and uncertainty about Brexit

On the other hand, the Bank of England provided a more upbeat estimate. While the headlines focused on lower projections for 2021, the BOE said that it is content with how the economy held up in the last three months of 2020 – setting the stage for more robust growth moving forward. 

GBP/USD Reaction

Are the bank's comment on resilience worth only 0.5% quarterly growth? Probably not, especially after the second quarter's comeback – no less than 16% between July and September. Traders are well aware of the comparison and the BOE's words and have likely priced in a better figure. What kind of surprise is pried in? An increase of 1% seems reasonable.

There is a good chance that GDP beats the estimates on the calendar but fails to exceed real, higher ones, and that may lead to a sell-off in the pound

Moreover, sterling may suffer selling pressure after a rally that may have gone too far, too fast. Several indicators such as the Relative Strength Index on the four-hour chart are pointing to overbought conditions. While some of the rises is related to dollar weakness rather than high-expectations for UK GDP, the result will likely be similar. 


The BOE hinted that the UK economy probably grew at a stronger rate than 0.5% expected – yet that may already be in the price and could trigger a "buy the rumor, sell the fact" response. 

GBP/USD Price Forecast 2021: Cable braces for calendar comeback amid three exits

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD stabilizes after US retail sales smash estimates

EUR/USD has bounced off its lows but remains below 1.20 after US retail sales smashed estimates with a 9.8% leap. Moreover, jobless claims tumbled to 576,000. Markets are digesting the big bulk of data.


GBP/USD rises toward 1.38 ahead of US data, Brexit meeting

GBP/USD is edging up toward 1.38, reversing its previous falls in tense trading ahead of all-important US retail sales. A Brexit-related meeting on Northern Ireland is also eyed. 


ETH seizes the spotlight as BTC and XRP contemplate retracement

Bitcoin price shows a correction in play after the MRI flashed a red ‘one’ cycle top signal. Ethereum shows a strong trend continuation while the rest of the market experiences a minor pullback. 

Read more

XAU/USD closes in on key $1,750 resistance

XAU/USD rises on Thursday supported by falling US T-bond yields. Gold faces a resistance at $1,750 in the near term. A downward correction to $1,740 is likely if XAU/USD fails to clear $1,750.

Gold News

Breaking: Citi (C) beats on EPS and revenue, investment banking booms!

Citigroup (NYSE:C) reports Q1 2021 earnings showing strong growth in investment banking following on from Goldman smashing it on Wednesday. Citi shares are trading $74.20 in pre-market up nearly 2%.

Read more