Daily Forex: GBP/USD In Focus As UK Slips Into Recession

Key Insights

• Analysts expect that UK GDP declined by 0.2% in the second quarter. 
• In Europe, traders will focus on the Industrial Production report for June. 
• The preliminary Consumer Sentiment report will be the key driver for the U.S. dollar today.

The weekend is near, but forex traders will be busy studying economic reports from the UK, EU, and U.S. The reports from the UK, which are expected to show that the economy is shrinking, will set the tone for the day.

UK

Today, GBP/USD traders will focus on the preliminary data for the second-quarter GDP Growth Rate report. The report is expected to show that GDP declined by 0.2% as the UK economy faced rising energy prices. On a year-over-year basis, GDP is expected to increase by 2.8%.

Traders will also have a chance to take a look at Industrial Production and Manufacturing Production reports for June. Industrial Production is expected to decline by 1.3%, while Manufacturing Production is projected to decrease by 1.8%.

It is already evident that the UK economy is slipping into recession. However, it remains to be seen whether the economic data will have a major impact on GBP/USD dynamics as traders remain focused on the outlook for Fed rate hikes.

Europe

In the EU, traders will focus on the Industrial Production report for June. On a month-over-month basis, Industrial Production is projected to grow by 0.2%.

Most likely, the report will have minimal impact on EUR/USD. The situation in the Euro Area has changed dramatically since June. Energy prices soared, and European countries have started to implement energy-saving measures.

The results of these measures will be visible in Industrial Production reports for July and August.

U.S.

In the U.S., the main economic event of the day is the release of the preliminary data for the Michigan Consumer Sentiment report for August. The report is expected to show that Consumer Sentiment improved from 51.5 in July to 52.5 in August.

Consumer activity is the key driver for the U.S. economy, so traders should closely monitor Consumer Sentiment. The U.S. Dollar Index has been under pressure in recent days as inflation reports missed analyst expectations, and markets started to price in a 50 bps rate hike at the next Fed meeting.

In case Consumer Sentiment report exceeds analyst expectations, the U.S. dollar may get some support ahead of the weekend.

For a look at all of today’s economic events, check out our economic calendar.