When is the UK Q4 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 early Friday, at 07:00 GMT, with the preliminary GDP figures for Q4 2021. Also increasing the importance of that time are monthly GDP figures for December, Trade Balance, Manufacturing Production and Industrial Production details for the stated period.

Having witnessed a 6.8% YoY jump in economic activities during the previous quarter, market players will be interested in the first estimation of the Q4 GDP figures, expected 6.4% YoY, to back the BOE’s rate hikes. That said, market consensus doesn’t back any change in the quarterly figure of 1.1%.

On the other hand, the GBP/USD traders also eye the Index of Services (3M/3M) for the same period, 1.3% prior, for further insight.

Meanwhile, Manufacturing Production, which makes up around 80% of total industrial production, is expected to ease to 0.1% MoM in December versus 1.1% prior. Further, the total Industrial Production is expected to weaken to 0.1% MoM from 1.1% previous readouts.

Considering the yearly figures, the Industrial Production for December is expected to have risen to 0.6% versus 0.1% previous while the Manufacturing Production is also anticipated to have strengthened to 1.7% in the reported month versus 0.4% last.

Separately, the UK Goods Trade Balance will be reported at the same time and is expected to show a deficit of £7.65 billion versus a £5.665 billion deficit reported in the last month.

How could affect GBP/USD?

GBP/USD remains on the back foot around 1.3530, down 0.15% intraday, as the US dollar bulls cheer the multi-month high US Consumer Price Index (CPI) and strong US Treasury yields. Also weighing on the cable prices are the fears concerning Brexit ahead of the key talks between UK Foreign Secretary Liz Truss and European Commission Vice-President Maros Sefcovic.

That said, UK Q4 GDP bears downbeat forecasts and chatters over the Bank of England’s (BOE) more rate hikes are on the table, which in turn keeps the GBP/USD pair on bull’s radar. However, Brexit talks and the US dollar strength may test the quote’s upside momentum.

While considering this, FXStreet’s Yohay Elam said,

Quarterly GDP releases tend to have more impact than monthly ones, and uncertainty about the BOE's next policy moves adds to potential volatility. In conclusion, there is more room for an upside surprise than a downside one. 

Ahead of the release, Westpac said,

GDP growth for the UK should remain robust in Q4, although the emergence of omicron in December is a source of downside risk (market f/c: 1.1%qtr; 6.4%yr). The UK’s trade balance will likely remain volatile in December as COVID-19 and Brexit continue to induce trade instability (market f/c: -£400mn).

Technically, a monthly resistance line near 1.3580 restricts short-term GBP/USD upside whereas the 100-DMA challenges the bears around 1.3500. However, MACD and RSI have recently pushed back the bulls.

Key notes

GBP/USD teases bears around 1.3550, Brexit talks, UK Q4 GDP eyed

UK GDP Preview: GBP/USD buy opportunity? Low expectations for December open door to upside surprise

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.