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 in early Friday, at 07:00 GMT, with the preliminary Gross Domestic Product (GDP) figures for the fourth quarter (Q4) of 2022. 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 0.3% QoQ contraction in economic activities during the previous quarter, market players will be interested in the first estimation of the UK Q4 GDP figures, expected 0.0%, to back the BOE’s hawkish bias. More interestingly, the MoM figures are expected to turn negative and the YoY numbers signal easing growth in the British economy.

On the other hand, the GBP/USD traders also eye the Index of Services (3M/3M) for the same period, bearing forecasts of 0.3% versus -0.1% prior, for further insight.

Meanwhile, Manufacturing Production, which makes up around 80% of total industrial production, is expected to ease to -0.4% MoM in September versus -1.6% prior. Further, the total Industrial Production is expected to recover from the previous contraction of -1.8% to a -0.2% MoM for the said month.

Considering the yearly figures, the Industrial Production for September is expected to have weakened to -5.3% versus -5.1% previous while the Manufacturing Production is also anticipated to have weakened to -6.1% in the reported month versus -6.7% the last.

Separately, the UK Goods Trade Balance will be reported at the same time, which previously marked a deficit of £1.802 billion.

Deviation impact on GBP/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined around 10-pips in deviations up to + or -9, although in some cases, if notable enough, a deviation can fuel movements over 30-40 pips.

How could affect GBP/USD?

GBP/USD remains sidelined around 1.2100 heading into Friday’s London open. In doing so, the Cable pair aptly portrays the market’s cautious mood ahead of the key UK data. Not only the British data dump but early signals for the next week’s US inflation data, namely preliminary readings of the US Michigan Consumer Sentiment Index and 5-year Consumer Inflation Expectations for February also amplifies the market’s anxiety.

That said, mixed plays of the UK recession fears, workers’ strikes and Brexit concerns join the US Dollar’s rebound to keep the GBP/USD bears hopeful. However, the dovish Fedspeak and recently downbeat US data weighed on the Cable pair.

That said, the Bank of England (BOE) officials failed to impress GBP/USD buyers the previous day as the majority of them raised doubts about further rate hike concerns despite refraining to signal rate cuts or a pause in tightening the monetary policy.

As a result, the UK Q4 GDP bears downbeat forecasts and chatters over the Bank of England’s (BOE) easy rate hikes are on the table, which in turn challenges the GBP/USD pair traders while pushing them off the bull’s radar. Hence, downbeat prints of the UK Q4 GDP could probe the GBP/USD buyers for a while, unless being too extreme, whereas a positive surprise might enable the Cable pair buyers to overcome the immediate 1.1740 hurdle.

While considering this, FXStreet’s  Dhwani Mehta said,

On the expected stagnation in the UK economy, GBP/USD could encounter ‘sell the fact’ trading, as the optimism surrounding warding off recession seems to be priced in by the market in this week, thus far.

Ahead of the release, Westpac said,

The UK’s Q4 GDP release should provide further evidence on the underlying deterioration of economic conditions, though the Bank of England’s February forecasts are for a shallower recession than they projected in November. Consensus is 0.0% QoQ, 0.4% YoY, with the December month reading -0.3% MoM. 

Key notes

GBP/USD probes bulls after three-day uptrend as UK GDP, US inflation cues loom 

GBP/USD Price Analysis: Drops below 1.2100 as risk-off impulse spikes further

UK GDP Preview: Growth to stagnate but recession narrowly averted

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 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.