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British GDP, published each quarter, measures the production and growth of the UK 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 pound.

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

Published on Wednesday at 9:30 GMT.

Indicator Background

British  Second Estimate  GDP is released after Preliminary GDP. Although the Preliminary release  has the most impact, Second Estimate GDP should also be  treated as  a market-mover and any unexpected reading could quickly affect the movement of GBP/USD.

The indicator has looked sharp in recent releases, reflecting strong growth by the British economy. The Q3 release came in at 0.8%, matching the forecast. The markets are not expecting any dramatic changes in Q4, with the estimate standing at 0.7%, thus confirming the first estimate.

Sentiments and levels

The pound hit some turbulence last week but still remains at high levels. Inflation is within the BOE’s 2.0% target, and there is increasing speculation that the Bank may have to consider a rate hike in the near future. Over in the US,  recent releases  have missed expectations,  but market sentiment remains upbeat and QE tapering is expected to continue, which would be a vote of confidence from the Federal Reserve. So,  the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.7180, 1.6990, 1.6705, 1.66, 1.6475 and 1.6343.

5 Scenarios

  1. Within expectations: 0.5% 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: 0.9% to 1.2%: An unexpected higher reading can send the pair above one resistance line.
  3. Well above expectations: Above 1.2%: A surge in GDP would push GBP/USD downwards, and a second resistance line might be broken as a result.
  4. Below expectations: 0.1% to 0.4%: A lower GDP figure than predicted could cause the pair to climb and drop below one support level.
  5. Well below expectations: Below 0.1%. A reading of zero or in negative territory could result in GBP/USD breaking  below  a second level of support.

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

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