When is the UK Q2 GDP and how could it 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 Thursday, at 06:00 GMT with the preliminary GDP figures for the Q2 2021. Also increasing the importance of that time are monthly GDP figures for June, Trade Balance, Manufacturing Production and Industrial Production details for the stated period.

Having witnessed a 1.6% contraction of economic activities in the previous quarter, market players will be interested in the first estimation of the Q2 GDP figures, expected +4.8% QoQ, to confirm the economic transition amid the covid resurgence fears. Market expectations back +22.1% YoY figures versus -6.1% previous readouts.

On the other hand, forecasts suggest that the monthly UK GDP will remain unchanged at 0.8% in June. GBP/USD traders also eye Index of Services (3M/3M) for the same period, forecast +5.5% versus +3.9% prior, for further insight.

Meanwhile, Manufacturing Production, which makes up around 80% of total industrial production, is expected to recover from -0.1% to +0.4% MoM in June. Further, the total Industrial Production is expected to ease from 0.8% to 0.3% MoM during the stated month.

Considering the yearly figures, the Industrial Production for June is expected to have eased to +9.4% versus +20.6% previous while the Manufacturing Production is also anticipated to have softened by 13.5% in the reported month versus 27.7% last.

Separately, the UK Goods Trade Balance will be reported at the same time and is expected to show a deficit of £9.1 billion versus an £8.481 billion deficit reported in May.

How could affect GBP/USD?

GBP/USD picks up bids to refresh intraday high around 1.3875, up 0.06% on a day while heading into Thursday’s London open. In doing so, the cable pair reacts to the US dollar pullback amid a lackluster day and mildly positive market sentiment. Also positive for the cable could be UK Health Minister Sajid Javid’s confirmation that the fully vaccinated adults don’t need to isolate.

Given the latest covid resurgence and variant fears in the UK, today’s British data dump will be the key to gauge the economic recovery. Also highlighting the importance of the data is the latest shift in the Bank of England (BOE) policymakers’ bullish bias from strong to moderate. Hence, the UK data will offer additional clues to the tapering chatters but are less likely to move the GBP/USD prices unless portraying a notable move from the previous quarter.

Ahead of the release, TD Securities said,

June GDP is released, and we look for downside risks with a 0.5% m/m gain (market forecast: 0.8%). May's GDP rebound proved more cautious than expected, and we expect more of the same in Jun & Jul in part because of rising Delta variant concerns. Supply constraints are likely to have weighed on the manufacturing sector, while cautious household demand holds back on services somewhat. We look for manufacturing growth of -0.5% m/m (forecast: 0.4%) and services growth of 0.6% m/m (expected: 0.9%). This leaves Q2 GDP growth at 4.6% q/q, slightly below the BoE's fresh estimate of 5% q/q (expected: 4.8%).

Technically, the cable pair dropped to the lowest in 12 days before bouncing off 1.3802 the previous day, portraying a bullish flag formation on the four-hour (4H) play. In addition to the upside favoring chart pattern, the pair’s sustained trading above 200-SMA and steady RSI, modest as well, keep GBP/USD buyers hopeful.

Key notes

GBP/USD awaits UK Q2 GDP to break the monotony below 1.3900

GBP/USD Forecast: Could UK GDP boost pound?

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.