The British Gross Domestic Product (GDP) provides 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 higher than the market forecast is bullish for the British pound.
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Thursday at 8:30 GMT.
Indicator Background
The British GDP, a key economic indicator, provides an excellent snapshot of the health and direction of the UK economy. Traders should pay particular attention to this quarterly indicator, as any unexpected reading could change the direction of GBP/USD.
GDP slumped in Q4 of 2011, contracting by 0.2%, matching the the market estimate. The forecast for Q1 also stands at -0.2%, indicating ongoing weakness in the UK economy. Will the indicator surprise the markets with an improved performance for the May reading?
Sentiments and levels
The pound is reeling from a horrendous May, and the free fall could well continue. The recession in Europe is deepening, and there is louder talk of Greece leaving the euro-zone. These events are sending nervous investors to safe haven currencies such as the dollar, and the greenback is taking full advantage. Thus, the overall sentiment continues to be bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.60, 1.5930, 1.5805, 1.5750, 1.5648 and 1.5603.
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 higher reading can send the pair above one resistance line.
- Well above expectations: Above 0.5%: A very strong reading could push GBP/USD upwards, and two or more resistance lines could be broken as a result.
- Below expectations: -0.9% to -0.6%: A GDP figure in deep negative territory could cause the pair to fall and drop below one support level.
- Well below expectations: Below -0.9%. In this scenario, GBP/USD could break two or more levels of support.
For more on the pound, see the GBP/USD forecast.
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