GBP/USD: Trading the British Second Estimate GDP

British Second  Estimate GDP, one of the most important economic releases, 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.

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

Published on Friday at 9:30 GMT.

Indicator Background

British  Second Estimate  GDP is a key economic indicator, and provides an excellent indication of the health and direction of the British economy. It follows the release Preliminary GDP, which was released in October. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of GBP/USD.

Preliminary  GDP in Q3 posted a gain of  0.5%, beating the estimate of 0.3%. No change is expected in Second Estimate  GDP, with  an identical forecast of  0.5%.

Sentiments and levels

The US dollar continues to roll since the US election and with  the Fed expected to raise rates in December, sentiment towards the greenback is very favorable. At the same time, the markets remain jittery about the effects that Brexit will have on the British economy, and this was underscored by the Autumn Statement, which downgraded GDP for 2017. So, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.2778, 1.2612, 1.2448, 1.2272, 1.2143 and 1.1943

5 Scenarios

1. Within expectations:  0.2% to 0.8%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.9% to 1.3%: An unexpected higher reading can push the pair above one resistance line.
3. Well above  expectations: Above 1.3%: A surge in  GDP would  push  the pound higher  and the pair could break a second line of  resistance as a result.
4. Below expectations: -0.3% to +0.1%: In this scenario, GBP/USD could drop below one support level.
5. Well  below  expectations: Below -0.3%. 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.