UK GDP arrives at 0% MoM in July, as expected
- UK GDP came in at 0% MoM in July, met estimates.
- GBP/USD keeps range near 1.3550 after the UK economic data.
The UK economy stalled in July, with the Gross Domestic Product (GDP) arriving at 0% following a 0.4% rebound in June, the latest data published by the Office for National Statistics (ONS) showed on Friday.
The market consensus was for no growth in the reported period.
Meanwhile, the Index of services (July) came in at 0.4% 3M/3M versus June’s 0.4%.
Other data from the UK showed that monthly Industrial and Manufacturing Production dropped by 0.9% and 1.3%, respectively, in July. Both readings undermined market expectations.
Market reaction to the UK data
The discouraging UK economic data failed to move the needle around the Pound Sterling. At the press time, GBP/USD is trading 0.15% lower on the day near 1.3550.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.15% | 0.12% | 0.05% | 0.04% | 0.18% | 0.09% | |
| EUR | -0.07% | 0.08% | 0.02% | 0.00% | -0.01% | 0.12% | 0.03% | |
| GBP | -0.15% | -0.08% | -0.06% | -0.10% | -0.12% | 0.05% | -0.05% | |
| JPY | -0.12% | -0.02% | 0.06% | -0.06% | -0.07% | 0.02% | -0.06% | |
| CAD | -0.05% | -0.00% | 0.10% | 0.06% | 0.03% | 0.13% | 0.05% | |
| AUD | -0.04% | 0.00% | 0.12% | 0.07% | -0.03% | 0.17% | 0.04% | |
| NZD | -0.18% | -0.12% | -0.05% | -0.02% | -0.13% | -0.17% | -0.09% | |
| CHF | -0.09% | -0.03% | 0.05% | 0.06% | -0.05% | -0.04% | 0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
This section below was published at 4:12 GMT as a preview of the UK GDP and industrial data releases.
The UK Economic Data Overview
The United Kingdom (UK) docket has the monthly Gross Domestic Product (GDP) to be released by the Office for National Statistics (ONS) on Friday, alongside the Trade Balance and Industrial Production, all of which will be published later this session at 06:00 GMT.
The UK GDP is expected to stagnate in July. Meanwhile, the Manufacturing Production, which makes up around 80% of total Industrial Production, is expected to come in at 0% month-over-month (MoM) in July, following a 0.5% recorded in June. Meanwhile, the Industrial Production is expected to come in at 0% MoM in July as compared to the previous reading of 0.7%.
On an annualized basis, the Industrial Production for July is expected to have risen to 1.1% versus 0.2 in % previous month, while the Manufacturing Output is also anticipated to have accelerated to 1.6% in the reported month versus 0% last.
Separately, the consensus for the UK Total Trade Balance is unknown for July, following a deficit of £5.015 billion last month.
How could affect GBP/USD?
Today's macro releases could be overshadowed as traders anticipate a policy divergence between the Bank of England and other major central banks.
The GBP/USD pair may appreciate as the BoE is unlikely to cut interest rates in the near term as stubborn inflationary pressures in the United Kingdom (UK).
Akhtar Faruqui, FXStreet’s Analyst notes: The GBP/USD pair may target its immediate barrier at the three-month high of 1.3594, aligned with the psychological level of 1.3600. A break above this crucial resistance zone would support the pair to approach the 1.3788, the highest since October 2021. On the downside, the primary support lies at the nine-day Exponential Moving Average (EMA) of 1.3524, followed by the 50-day EMA at 1.3475. A break below these levels would weaken the short- and medium-term price momentum and put downward pressure on the pair to navigate the region around the seven-week low of 1.3253.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
