The UK saw a slight economic growth in August, with gross domestic product (GDP) updated to 0.1%, revising the earlier estimate of 0%. This followed a contraction of 0.1% in July, as reported by the Office for National Statistics (ONS) on Thursday.
Analysts had anticipated a growth rate of 0.1% for this period.
Conversely, the service sector index remained steady at 0.4% from July to August.
Additionally, August data revealed increases in industrial production by 0.4% and manufacturing output by 0.7%, both surpassing what the market had expected.
Market Response to UK Economic Data
As of the latest update, the GBP/USD pair stands at 1.3415, reflecting a modest rise of 0.09% for the day.
Overview of UK GDP and Industrial Data
On Thursday, the ONS was set to release data detailing UK GDP and industrial production for August. Expectations suggested a monthly GDP rise of 0.1%, a slight improvement from the 0% recorded in July.
Furthermore, industrial output was projected to increase by 0.2% in August following a notable decline of 0.9% in July. However, there were expectations for a 0.6% drop in annual production for August, contrasting with a 0.1% rise observed previously.
Potential Impact on GBP/USD
If the UK economy demonstrates growth for August, it could bolster GBP/USD, potentially reducing the chances of further rate cuts by the Bank of England (BoE) this year. Conversely, economic contraction may elevate the likelihood of easing monetary policies, especially following mixed labor market reports for the three months ending August. Traders will closely watch the industrial production data, a critical indicator of manufacturing strength, due for release later today. According to reports, there is a 46 basis point interest rate cut anticipated by the BoE in its remaining policy meetings this year.
The GBP/USD pair is gaining traction partly because of the US dollar’s struggles amid rising trade tensions with China. Recently, US President Donald Trump remarked on the ongoing trade war with China, while Treasury Secretary Scott Bessent suggested a long-term pause on high tariffs on Chinese imports to address disputes over essential minerals.
Presently, the GBP/USD pair trades around 1.3420, with immediate resistance at the 50-day exponential moving average (EMA) at 1.3451. If it breaks through this level, there’s potential to reach around 1.3726, which was the peak on September 17. On the downside, initial support appears at the psychological threshold of 1.3400, followed by the 9-day EMA at 1.3390. Should it dip further, the pair might test a two-month low of 1.3248.
