GBP/USD: Trading the British Preliminary GDP Jul 2013


British Preliminary Gross Domestic Product (GDP) is considered one of the most important economic indicators. It is published each quarter, which magnifies its impact. A reading which is higher than the market forecast is bullish for the pound.

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

Published on Thursday 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. There are three versions of GDP, and Preliminary GDP is released the earliest, and hence has the most impact. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of GBP/USD.

The GDP reading in Q1 posted a gain of 0.3%, which beat the estimate of 0.1%. The markets are expecting a better reading for Q2, with an estimate of 0.6%. Will the indicator meet or beat this prediction?

Sentiments and levels

The British pound is enjoying a very strong run against the retreating US dollar, gaining about five cents in the past two weeks. Will this impressive rally continue or run out of steam? Market sentiment remains much more positive about the US economy than the British economy, and US releases have generally been better than the data we’re seeing out of the UK. We could see a correction if British numbers fail to meet market expectations. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5648, 1.5550, 1.5484, 1.5350, 1.5258 and 1.5196.

5 Scenarios

  1. Within expectations: 0.3% to 0.9%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations:1.0.% to 1.4%: An unexpected higher reading can push the pair above one resistance line.
  3. Well above expectations: Above 1.4%: 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: -0.1% to 0.2%: In this scenario, GBP/USD could drop below one support level.
  5. Well below expectations: Below -0.1%. A very poor release 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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About Author

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.