The Gross Domestic Product (GDP) indicator is a measurement of the production and growth of the economy. Analysts consider GDP one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the euro.
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Wednesday at 10:00 GMT.
Indicator Background
GDP is released quarterly, and provides an excellent indication of the health and direction of the economy in the past quarter. However, the eurozone GDP indicator tends to be moderate in impact, as both Germany and France release their GDP figures earlier.
The indicator recorded a small increase of 0.2% over the previous two readings. However, the market forecast for February is for a sharp drop to -0.4%. Such a figure would be the first contraction of the indicator since 2009. Given that the market predictions are usually within expectations, there is a strong chance that we will see negative numbers for the February reading.
Sentiments and levels
Although an agreement has been finally hammered out on the Greek bailout, there is serious unrest in Greece, and other eurozone countries, notably Portugal, are in deep trouble as well. There is increasing concern about the future viability of the euro, and traders may seek safer and more secure havens for their money, notably the US dollar. Thus, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.3330, 1.3280, 1.3212, 1.3145, 1.3060, 1.30 and 1.2945.
5 Scenarios
- Within expectations: -0.7% to -0.1%. In such a scenario, EUR/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 0% to 0.3%: An unexpected reading of zero or higher could send the pair well above one resistance line.
- Well above expectations: Above 0.3%: The chances of such a scenario are low. Such an outcome would push EUR/USD upwards, and a second resistance level might be broken as a result.
- Below expectations: -1.1% to -0.8%: A lower GDP figure than predicted could cause the pair to drop and break one support level.
- Well below expectations: Below -1.1%. Given the weak eurozone, such an outcome cannot be discounted. In this scenario, EUR/USD will likely drop and could break two or more support levels.
For more on the Euro, see the EUR/USD.