Waiting for the UK GDP: What Will It Show?

Today’s UK labor data has delivered a complex picture, setting the stage for tomorrow’s GDP release, which could significantly impact the pound’s direction. On one hand, payrolled employees decreased by 59,000, or 0.2%, in August 2024—marking a concerning development for wage-earners. This fall follows a downwardly revised 6,000 drop in the previous month and raises questions about the health of the labor market.

However, the number of people employed in the UK surged by 265,000 in the three months leading to July 2024, far surpassing market expectations of a 115,000 increase. This was the sharpest rise in employment since November 2022, mainly driven by a surge in full-time jobs. Such mixed data leaves the market in suspense: Will the BOE take a more dovish stance based on wage data, or will the overall rise in employment suggest a more cautious approach to rate cuts?

Tomorrow’s GDP release will be critical. Should the GDP print show further economic weakness, expect the pound to come under heavy selling pressure as traders prepare for a more aggressive response from the BOE. If the GDP data aligns with today’s mixed labor report, we could see the pound move lower, especially in key pairs like euro/pound and pound/dollar, creating significant volatility. A weak GDP print could be the final nudge the market needs to shift toward pricing in steeper rate cuts from the BOE, leading to a potential rally in euro/pound. Traders should stay alert for opportunities, as tomorrow’s GDP release could provide the clarity the market has been waiting for.