US Advance Gross Domestic Product (GDP) is a key release and is published each quarter. GDP measures production and growth of the economy, and is considered by analysts as one the most important indicators of economic activity. The Advance GDP is the first of three versions and has the most impact on the movement of GDP/USD. A reading which is higher than the market forecast is bullish for the pound.
Update: GDP at +4.0%, much better than expected. – USD jumps
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Wednesday at 12:30 GMT.
Indicator Background
US Advance GDP is considered one of the most important economic indicators, and provides an excellent indication of the health and direction of the US economy. Traders should pay close attention to the GDP release, as an unexpected reading could quickly affect the direction of GBP/USD.
US Advance GDP disappointed in Q1, gaining just 0.1% according to the initial release, well below the estimate of 1.2%. Things only got worse in the consequent revisions. According to the last revision, the US economy contracted at an annual rate of no less than 2.9%.
The markets are expecting a strong turnaround in Q2, with an estimate of 3.1%. Will the indicator meet or beat this rosy prediction?
Sentiments and levels
British numbers have been generally positive, but that hasn’t been enough to prevent the pound from shedding almost 200 points in July. US numbers continue to point in the right direction, led by the all-important employment indicators. Although inflation remains weak, market sentiment is strong, and this has help the dollar post gains against most of its rivals. So, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.7180, 1.7108, 1.6989, 1.6823, 1.6669, and 1.66.
5 Scenarios
- Within expectations: 2.8% to 3.4%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 3.5% to 3.9%: An unexpected higher reading can push the pair below one support line.
- Well above expectations: Above 3.9%: A surge in the reading would likely boost the dollar, and the pair could break below a second support line as a result.
- Below expectations: 2.3% to 2.7%: In this scenario, GBP/USD could push above one resistance level.
- Well below expectations: Below 2.3%. A very weak reading could lead to the pair breaking above a second resistance line.
For more on the pound, see the GBP/USD.
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