GBP/USD: Trading the British Second GDP Aug 2013

British Preliminary Gross Domestic Product (GDP) is a key release and is published each quarter. GDP measures production and growth of the economy, and is considered by analysts as 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 8:30 GMT.

Indicator Background

Second Estimate GDP follows Preliminary GDP, which was released in late July. In Q1, Second Estimate GDP posted a gain of 0.3%, which matched the forecast. The markets have done an excellent job of forecasting this key indicator, as the past four releases have matched the estimates. GDP is expected to rise a respectable 0.6% for Q2. Will the indicator meet or beat this prediction?

Sentiments and levels

The pound enjoyed another strong week at the expense of the US dollar, as UK employment and retail sales data looked  sharp. Will the pair’s upward rally continue? US employment numbers have looked solid and this is bound to increase speculation about QE tapering, which would be bullish for the dollar. The FOMC minutes didn’t say much, but the dollar still got a boost. So, the overall sentiment is neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5832, 1.5752, 1.5648, 1.5550, 1.5484, and 1.5350.

5 Scenarios

1. Within expectations: 0.4% to 0.8%. 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 push the pair above one resistance line.
3. Well above expectations: Above 1.2%: A surge in the reading would likely boost the pound, and the pair could break a second line of resistance as a result.
4. Below expectations: 0.0% to 0.4%: In this scenario, GBP/USD could drop below one support level.
5. Well below expectations: Below 0.0%. A decline in GDP would likely 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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