GBP/USD: Trading the first British GDP January 2014

British Preliminary GDP, one of the most important economic releases, 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 Tuesday at 9:30 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. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of GBP/USD.

Preliminary GDP continues to improve, as the British economy steams ahead and economic releases point upwards. The Q3 reading posted a strong gain of 0.8%, matching the forecast.

Sentiments and levels

GBP/USD posted modest gains last week, but the pound’s steep  rise against the dollar has slowed down.  There is a  strong likelihood that that  the Federal Reserve will  again taper QE this week, and  such a move would likely  bolster confidence in the US economy and provide a boost to the dollar. The BOE continues to reiterate  that it  has no plans to  raise interest rates, as it does not want to see the pound gain ground too quickly. So, the overall sentiment is  neutral on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6990, 1.6705, 1.6600, 1.6475, 1.6343, and 1.6247.

5 Scenarios

1. Within expectations:  0.6% to 1.0%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.1% to 1.4%: An unexpected higher reading can push the pair above one resistance line.
3. Well above  expectations: Above 1.4%: A surge in the reading would  push  the pound higher  and the pair could break a second line of  resistance as a result.
4. Below expectations: 0.2% to 0.5%: In this scenario, GBP/USD could drop below one support level.
5. Well  below  expectations: Below 0.2%. A very weak reading 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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