The UK Economic Data Overview

Thursday's UK economic docket features the release of the monthly GDP print, alongside the Trade Balance and Industrial Production, all of which will be published by the Office for National Statistics (ONS) at 06:00 GMT.

The UK economy is expected to have expanded by 0.1% in February, up from a flat reading in the previous month. Meanwhile, the Manufacturing Production, which makes up around 80% of total Industrial Production, is anticipated to show a 0.3% MoM rise, up from a modest of 0.1% increase in January. Meanwhile, the total Industrial Production seems to be coming in at 0.0% MoM in February as compared to the previous reading of -0.1%.

On an annualized basis, the Industrial Production is expected to have contracted by 0.9 versus 0.4% growth in the previous month, while the manufacturing output is also anticipated to have fallen by 0.3% in the reported month, versus 1.3% last month. Simultaneously, the UK Goods Trade Balance will be reported and is anticipated to show a deficit of £20.02 billion in February vs a £14.449 billion deficit reported in the previous month.

How could the UK data affect GBP/USD?

A surprisingly stronger UK macro data could benefit the British Pound (GBP). In contrast, any disappointment is more likely to be overshadowed by expectations that the war-driven surge in energy prices will revive inflation and force the Bank of England (BoE) to adopt a more hawkish stance. This, along with the prevailing US Dollar (USD) selling bias, suggests that the path of least resistance for the GBP/USD pair is to the upside.

GBP/USD daily chart

Technical Analysis:

The recent breakout through the 1.3415-1.3425 confluence resistance– comprising the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the January-March fall – was seen as a key trigger for bullish traders. Moreover, the subsequent strength beyond the 1.3500 psychological mark, which coincided with the 50% retracement level, validates the near-term positive outlook for the GBP/USD pair.

Meanwhile, momentum indicators also back the positive bias. In fact, the Relative Strength Index (RSI) hovers around 63, and the Moving Average Convergence Divergence (MACD) line is positioned above zero with an expanding positive histogram. This hints that buyers still have the upper hand as long as price holds above the resistance breakpoints, though bulls might still await a move beyond the 61.8% Fibo. level.