UK GDP News and Analysis

• UK GDP YoY prints in line with estimates of 0.5%
• Monthly GDP rose to 0.2% in August, up from -0.6% in July
• Economic headwinds remain in the UK as growth remains limited
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

UK GDP Posts a Positive Response to Worse-Than-Expected Decline in July

UK GDP revealed a positive response to July’s shock contraction – which was revised lower to -0.6% from an initial estimate of -0.5%. GDP in the month of August rose by 0.2% as expected. The three-month average, a more smoothed measure of GDP, rose 0.3% – in line with forecasts.

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The services sector grew by 0.4% in August and there were contractions in the production sector and in construction. The path of UK GDP has been choppy in 2023 – a sign of an uncertain economic outlook both domestically and internationally as the global growth slowdown takes hold.

Progress is being made on the inflation front but still remains high compared to other developed economies. The Bank of England will now be looking ahead to next week’s unemployment data and average earnings figures after seeing positive developments in the job market (moderate easing) and concerning wage data which recently breached the 8% mark – a concern for the central bank.

Immediate Market Reaction

Cable initially dropped on the release of the data but has subsequently reversed the decline and trades marginally higher than it did in the moments before the data release.

GBP/USD 5-minute chart

Source: TradingView, prepared by Richard Snow

GBP/USD has benefitted from the recent dollar selloff, enabling the pair to lift off the recent swing low which came in ahead of the psychological level of 1.2000.

GBP/USD Daily Chart

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX