Photo by Colin Watts on Unsplash 
 

The UK economy remained in contraction in October, with the Gross Domestic Product (GDP) declining by 0.1% following a 0.1% drop reported in September, the latest data published by the Office for National Statistics (ONS) showed on Friday.

The market forecast was for a 0.1% increase in the same period.

Meanwhile, the Index of services (October) arrived at 0% 3M/3M versus September’s 0.2%.

Other data from the UK showed that monthly Industrial and Manufacturing Production jumped by 1.1% and 0.5%, respectively, in October.

Market reaction to the UK data
 

At the press time, the GBP/USD pair is losing 0.08% on the day to trade at 1.3380.

Pound Sterling Price Today
 

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the New Zealand Dollar.
 

UK GDP, Industrial Production Data Overview
 

The United Kingdom (UK) economic docket features the monthly Gross Domestic Product (GDP) print for October and Industrial Production figures, to be published by the Office for National Statistics (ONS) this Thursday at 07:00 GMT.

The UK economy is expected to have registered a modest 0.1% growth in October, compared to the 0.1% contraction recorded in the previous month. Meanwhile, the UK Industrial Production is seen rising 0.7% MoM after declining 2% in September, while the annual output is anticipated to fall 1.2% during the reported month, following a 2.5% decline in the previous month.

How could UK GDP and Industrial Production data affect GBP/USD?
 

Any disappointment from the UK macro data, especially the growth figures, will reaffirm market bets that the Bank of England (BoE) will cut interest rates next week and weigh on the British Pound (GBP). The immediate market reaction, however, is more likely to remain limited amid the underlying bearish sentiment surrounding the US Dollar (USD), which continues to be weighed down by the Federal Reserve's (Fed) dovish outlook.

In contrast, better-than-expected UK economic releases should assist the GBP/USD pair to build on its recent uptrend witnessed over the past three weeks or so. Even from a technical perspective, this week's sustained breakout and acceptance above the very important 200-day Simple Moving Average (SMA) backs the case for a further appreciation for spot prices. Hence, any corrective pullback is more likely to get bought into and remain limited.

Some follow-through buying beyond the overnight swing high, around the 1.3435-1.3440 area, will reaffirm the positive outlook and allow the GBP/USD pair to reclaim the 1.3500 psychological mark. On the flip side, the 200-day SMA, currently pegged near the 1.3340 region, should protect the immediate downside, below which spot prices could weaken below the 1.3300 mark and test the next relevant support near the 1.3240-1.3235 zone.

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