GBP/USD: Trading the UK Preliminary GDP

UK Preliminary GDP, published each quarter, is the first of three GDP releases. GDP measures production and growth of the economy, and is considered by analysts one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the pound.

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

Published on Thursday at 8:30 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 in Q2 posted a strong gain of 0.7%, edging above the forecast of 0.6%. The markets are forecasting a weaker Q3, with the Preliminary GDP estimate standing at 0.3%.

Sentiments and levels

With the British government signaling it is preparing to invoke Article 50 and formally leave the EU, Brexit jitters will likely worsen, despite decent UK numbers. The BoE is expected to lower rates in November, while a Fed rate hike is priced in at 70%. So, monetary divergence continues to favor the US dollar. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.2620, 1.2400, 1.2130, 1.1943 and 1.1844

5 Scenarios

  1. Within expectations: 0.0% to 0.6%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 0.7% to 1.1%: An unexpected higher reading can push the pair above one resistance line.
  3. Well above expectations: Above 1.1%: A surge in the reading could push the pound higher and the pair could break a second line of resistance as a result.
  4. Below expectations: -0.4% to -0.1%: If GDP contracts, GBP/USD could drop below one support level.
  5. Well below expectations: Below -0.4%. A very weak reading could hurt the pound, and the pair could fall below a second level of support.

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

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