The Gross Domestic Product (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.
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Friday at 9:30 GMT.
Indicator Background
GDP is released quarterly, which often makes the indicator a market-mover. The indicator provides an important snapshot of the health and direction of the economy in the past quarter.
After a strong 0.5% increase in GDP in the November reading, the markets are predicting a 0.2% drop. This would be the first contraction in a year, and any dip into negative territory is sure to get the market’s attention, and could hurt the pound. Traders should keep in mind that the market forecasts for GDP are quite accurate, so the chances of a drop in GDP this month are high.
Sentiments and levels
Retail sales was the bright spot in the January economic data, recording a 0.9% jump. Although the UK economy is sluggish, the pound has done very well against the dollar in 2012, and could continue to rally.
Technical levels, from top to bottom: 1.60, 1.59, 1.5755, 1.5720, 1.5629, 1.5520 and 1.54.
5 Scenarios
- Within expectations: -0.5% to 0.1%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
- Above expectations: 0.2% to 0.5%: An unexpected reading of zero or higher could send the pair well above one resistance line.
- Well above expectations: Above 0.5%: The chances of such a scenario are low. Such an outcome would push GBP/USD upwards, and a second resistance level might be broken as a result.
- Below expectations: -0.9% to -0.6%: A lower GDP figure than predicted could cause the pair to drop and break one support level.
- Well below expectations: Below -1.0%. In this scenario, GBP/USD will likely drop and could break two or more support levels.
For more on the pound, see the GBP/USD forecast.
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