Tomorrow, there will be a host of data coming out from the UK and volatility is expected to be on the higher side.
Chief amongst the data will be the GDP growth and the Manufacturing Production. A few hours later, we will have another important print, the Annual Budget Report.
It has been hot-and-cold when it comes to UK GDP numbers so far this year. The only consistency shown is beating market expectations to either side.
Given the drama caused by the uncertainty surrounding Brexit and the coronavirus, it shouldn’t surprise if the numbers are off again. The stormy weather is likely to add to that deviation too.
How Did We Get to the Current GDP Figure?
Brexit took the limelight in the last quarter of 2019, remaining the main driver for depressing productivity in the UK manufacturing sector. It kept business sentiment and consumer spending at low levels.
With the trade war affecting the automobile industry, which took the biggest hit since 2001, and without a deal before January, the trend continued into the new year. As a result, the sale of new cars dropped by 7.3% in January 2020.
Despite the business outlook improving after the UK election, resulting in authorizing investments that were placed on hold pending the election outcome, investors remain cautious.
Consumer spending increased as wages rose to give a needed boost in the first quarter of 2020. However, the sentiment was dented by the coronavirus outbreak, as it sent the business confidence to six months low.
Improving business activities also took a hit due to the weather as the storms across the UK forced the majority of shoppers to opt for online spending.
GBPUSD Finds it Difficult to Soar Higher
The recent market meltdown is providing ample volatility into the markets and GBPUSD is carving bigger ranges. Markets, however, are cautious about how Brexit will take place.
GBPUSD found a bottom at 1.2725 and swung higher posting gains to the 1.3200 handle. We can see volatility coming into play on the GDP release today.
Expectation Going Forward
Mixed variables are in play here.
While business sentiment has improved at the start of the quarter, along with wages and consumer spending, the coronavirus outbreak and the weather played a big part in sending macros to the lower end of the curve.
Like in many other economies, the medical industry is seeing a boost in the UK too.
The BOE along with the Treasury is willing to take appropriate measures to counter coronavirus implications. With a lot of ups and downs in economic activity, external factors might hamper growth.
Should tomorrow’s numbers miss the mark, the prospect for growth will remain slow. Therefore, the UK economy might continue to expand at a snail-like pace.