GBP/USD: Trading the British Second GDP May 2015

British Second Estimate 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 pound.

Update:  UK updated GDP: +0.3% – GBP/USD slides

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

Published on Thursday at 8:30 GMT.

Indicator Background

British Second Estimate GDP is released quarterly, and the GDP reports are highly anticipated by the market.  An unexpected reading can have an immediate impact on the movement of GBP/USD.

The markets had their first look at GDP figures for Q1 with the release of Preliminary GDP in April, which showed a gain of 0.3%. This was short of the estimate of 0.5%. Little change is expected in the Second Estimate GDP release, with a forecast of 0.4%.

Sentiments and levels

Recent US data has been lukewarm, and the pound has taken advantage with strong gains in the month of May. Still, sentiment over the US economy remains strong, as Q2 is expected to be much stronger than Q1.  In the UK, the recent British election results are good news for the pound, as the new majority government  will have the political muscle to take steps to boost the UK economy. So, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5590, 1.5485, 1.5425, 1.5350, 1.5270 and  1.5080.

5 Scenarios

1. Within expectations: 0.1% to 0.7%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.8% to 1.2%: A strong reading could send  the pair  above  one  resistance line.
3. Well above expectations: Above 1.2%: The chances of such a scenario are low. Such an outcome would likely push GBP/USD  upwards, and a second  resistance level might be broken as a result.
4. Below expectations: -0.5% to -0.1%:   A  contraction in GDP  could cause the  pair to  drop and break one support level.
5. Well below expectations:  Below -0.6%. A sharp contraction in growth could push GBP/USD below a second support level.

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

To follow this event live:     [do action=”calendar-event” eventid=”cafae3e0-3d9a-43f4-876c-ec7490465d3e”/]