UK GDP unexpectedly falls by 0.1% MoM in October vs. +0.1% expected

Market reaction to the UK data

At the press time, the GBP/USD pair is losing 0.08% on the day to trade at 1.3380.

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 New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.03%	0.11%	0.06%	0.02%	-0.01%	-0.02%	-0.00%
EUR	-0.03%		0.08%	0.05%	-0.01%	-0.04%	-0.05%	-0.03%
GBP	-0.11%	-0.08%		-0.04%	-0.08%	-0.12%	-0.12%	-0.11%
JPY	-0.06%	-0.05%	0.04%		-0.02%	-0.06%	-0.08%	-0.05%
CAD	-0.02%	0.00%	0.08%	0.02%		-0.04%	-0.05%	-0.02%
AUD	0.01%	0.04%	0.12%	0.06%	0.04%		-0.01%	0.02%
NZD	0.02%	0.05%	0.12%	0.08%	0.05%	0.00%		0.02%
CHF	0.00%	0.03%	0.11%	0.05%	0.02%	-0.02%	-0.02%

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 5:04 GMT on Friday as a preview of the UK GDP and Industrial data releases.

UK GDP, Industrial Production Data Overview

The United Kingdom (UK) economic docket features the monthly Gross Domestic Product (GDP) print for October and Industrial Production figures, to be published by the Office for National Statistics (ONS) this Thursday at 07:00 GMT.

The UK economy is expected to have registered a modest 0.1% growth in October, compared to the 0.1% contraction recorded in the previous month. Meanwhile, the UK Industrial Production is seen rising 0.7% MoM after declining 2% in September, while the annual output is anticipated to fall 1.2% during the reported month, following a 2.5% decline in the previous month.

How could UK GDP and Industrial Production data affect GBP/USD?

Any disappointment from the UK macro data, especially the growth figures, will reaffirm market bets that the Bank of England (BoE) will cut interest rates next week and weigh on the British Pound (GBP). The immediate market reaction, however, is more likely to remain limited amid the underlying bearish sentiment surrounding the US Dollar (USD), which continues to be weighed down by the Federal Reserve's (Fed) dovish outlook.

In contrast, better-than-expected UK economic releases should assist the GBP/USD pair to build on its recent uptrend witnessed over the past three weeks or so. Even from a technical perspective, this week's sustained breakout and acceptance above the very important 200-day Simple Moving Average (SMA) backs the case for a further appreciation for spot prices. Hence, any corrective pullback is more likely to get bought into and remain limited.

Some follow-through buying beyond the overnight swing high, around the 1.3435-1.3440 area, will reaffirm the positive outlook and allow the GBP/USD pair to reclaim the 1.3500 psychological mark. On the flip side, the 200-day SMA, currently pegged near the 1.3340 region, should protect the immediate downside, below which spot prices could weaken below the 1.3300 mark and test the next relevant support near the 1.3240-1.3235 zone.

GDP FAQs

What is GDP and how is it recorded?

A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.

How does GDP influence currencies?

A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.

How does higher GDP impact the price of Gold?

When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.