GBP/USD: Trading the British Preliminary GDP Jan 2015

British Preliminary 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. Preliminary GDP is the first version of the indicator and tends to have the most impact. A reading which is higher than the market forecast is bullish for the pound.

Update: UK GDP rises only 0.5% – GBP/USD slides

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Tuesday at 9:30 GMT.

Indicator Background

British Preliminary GDP is a key economic indicator, and provides an excellent indication of the health and direction of the British economy. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of GBP/USD.

Final GDP for Q3, which came out in December, posted a gain of 0.7%. This matched the forecast. The estimate for the Q4 Preliminary GDP stands at 0.6%. Will the indicator surprise the markets and beat the prediction?

Sentiments and levels

With inflation levels continuing to falter an PMIs pointing to slower growth in the UK, a rate hike from the BOE later this year is no longer a sure bet. In the US, the Fed will release its statement later in the week and a rate hike is a question of when, not if. This divergence favors the US dollar, which has also benefitted from the strong US economy. So, the overall sentiment is neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5416, 1.5290, 1.5114, 1.5008, 1.4813 and 1.4752.

5 Scenarios

1. Within expectations: 0.4% to 1.0%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.1% to 1.5%: An unexpected higher reading can push the pair above one resistance line.
3. Well above expectations: Above 1.5%: A surge in the reading would likely boost the pound, and the pair could break a second line of resistance as a result.
4. Below expectations: 0.0% to 0.3%: In this scenario, GBP/USD could drop below one support level.
5. Well below expectations: Below 0.0%. A reading in negative territory could see the pair drop below two or more support lines.

For more on the pound, see the GBP/USD.

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