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GBP/USD: Trading the UK Second Estimate GDP

UK Second  Estimate 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 Wednesday at 9:30 GMT.

Indicator Background

British  Second Estimate  GDP is a key economic indicator, and provides an excellent indication of the health and direction of the British economy. It follows the release Preliminary GDP, which was released in January. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of GBP/USD.

Preliminary  GDP in Q3 posted a gain of  0.6%, edging above the estimate of 0.5%. The estimate for Second Estimate  GDP remains at 0.6%.

Sentiments and levels

Janet Yellen presented lawmakers with a positive assessment of the US economy, and strongly hinted that another rate hike is coming in the first half of 2017.  In the UK, the BoE appears in no rush to raise rates, even with inflation moving higher. So, monetary divergence favors the greenback. Thus, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.2775, 1.2674, 1.2511, 1.2385, 1.2218 and 1.2080

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%: A surge in  GDP would  push  the pound higher  and the pair could break a second line of  resistance as a result.
  4. Below expectations: -0.2% to +0.2%: 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.

Kenny Fisher

Kenny Fisher

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.