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GBP/USD: Trading the British Preliminary GDP Jul 2014

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. A reading which is better than the market forecast is bullish for the pound.

Update:  UK GDP 0.8% as expected – GBP/USD edges higher

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

Published on Friday 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.

GDP has been steady, with the indicator posting a healthy gain of 0.8% in Q1. This was just shy of the estimate of 0.9%. The estimate for Q2 is unchanged, at 0.8%? Will GDP follow suit with a strong reading?

Sentiments and levels

Despite slight losses last week, the pound  remains at high levels. However, solid British inflation and employment numbers failed to push the pound higher. Traders should keep a close eye on British Retail Sales and GDP, both of which are market-movers. US numbers were a mix last week, but market sentiment remains high regarding the US economy, and talk of an interest rate hike will only intensify as QE should be wound up in October. So, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.7375, 1.7180, 1.7108, 1.6989, 1.6823, and 1.6684.

5 Scenarios

  1. Within expectations:  0.6% 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%: An surge in the reading would likely help the pound, and the pair could break a second line of resistance as a result.
  4. Below expectations: 0.2% to 0.6%: In this scenario, GBP/USD could drop below one support level.
  5. Well below  expectations: Below 0.2%. 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 forecast.

 

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Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.