GBP/USD: Trading the British Preliminary GDP Apr 2014

British  Preliminary  GDP is a measurement of the production and growth of the economy and  analysts consider GDP one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the British pound.

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

Published on Tuesday at 8:30 GMT.

 

Indicator Background

GDP is released quarterly, magnifying the impact of each release. GDP is one of the key economic indicators and provides an excellent indication of the health and direction of the economy. Traders should treat the indicator as a market-mover which can have a significant impact on the movement of GBP/USD.

GDP  edged lower in Q4,  posting a gain of 0.7%, which matched the forecast.  The markets are expecting a stronger reading in Q1, with the estimate standing at 0.9%. Will the indicator meet or beat  this rosy prediction?

 

Sentiments and levels

The  pound  has been  showing little movement  since mid-April,  content to hug the 1.68 line.  Will  GBP/USD finally  break out? Much will depend on the GBP and PMI releases.  In the US, we’ve seen some mixed numbers, but the Fed is expected to implement another QE taper later in the week, which could help the US dollar. Much will depend on the all-important NFPs  late in the week.  Thus, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.7375, 1.7180, 16990, 1.6823, 1.6705 and  1.66.

5 Scenarios

1. Within expectations: 0.6% to 1.2%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.3% to 1.6%: An unexpected strong reading could send  the pair  above  one  resistance line.
3. Well above expectations: Above 1.6%: Such an outcome would push GBP/USD   upwards, and a second  resistance level might be broken as a result.
4. Below expectations: 0.2% to 0.5%:   A  weak GDP  reading could cause the  pair to  drop and break one support level.
5. Well below expectations:  Below 0.2%. If the indicator posts a weak gain or contracts, GBP/USD will  likely drop  and could break through a second support level.

For more on the pound, see the  GBP/USD forecast.

To follow this event live:   [do action=”calendar-event” eventid=”cafae3e0-3d9a-43f4-876c-ec7490465d3e”/]