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The British economy grew by 1.1% in the second quarter of 2010 according to the first release. This is a very impressive leap, much higher than 0.6% that was expected. GBP/USD reacts with a leap against the dollar, breaking the 1.5350 resistance line and continuing north. Update on the recovering Pound.

Early expectations stood on a growth rate of 0.6%, double the growth rate of Q1. The actual result, 1.1%, is almost double the early forecasts and almost 4 times the growth rate in Q1. Let’s see the lines:

GBP/USD now trades at 1.5397, up from around 1.5300 before the release. The release, at 8:30 GMT, created a gap in the 30 minute graph, as this result took traders by surprise.

Above 1.5350, the next minor line of resistance is at 1.5470, which was a peak last Friday. Much more significant resistance is found at 1.5520, which was a stubborn line of resistance, tested multiple times in April.

Above, 1.57 provides minor resistance, after being a line of support last year. 1.5833 is already a very strong line, serving as a support line before the Pound collapsed, and capping an attempt to recover afterwards.

In case the Pound falls, it will find support at the 1.5350 it just broke, followed by 1.5230 and 1.5130, which served as minor lines of support and resistance recently.

Earlier this week, the MPC meeting minutes showed that there’s still only one member, Andrew Sentance, that supports a rate hike. The others wanted to see low rates in order to help the economy. Now it seems that the economy is doing well, and that a rate hike won’t hurt the attempts to recover.

Also retail sales, published yesterday, came out better than expected, with a rise of 0.7% (0.5% expected) and provided another sign that the economy is improving. Will we soon see a rate hike in Britain?

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