GBP/USD: Trading the British Second Estimate GDP

British 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.

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 December. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of GBP/USD.

Preliminary GDP in Q4 posted a gain of 0.5%, matching the forecast. No change is expected in Second Estimate GDP, which a forecast of 0.5%.

Sentiments and levels

The US economy has slowed down in 2016, but last week’s employment and inflation numbers beat expectations, so a March rate hike is again on the table. This monetary divergence between the Fed and the BOE is bullish for the US dollar.

Technical levels, from top to bottom: 1.4227, 1.4135, 1.40, 1.3910, 1.3809 and 1.3667.

5 Scenarios

  1. Within expectations: 0.2% 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 1.3%: An unexpected higher reading can push the pair above one resistance line.
  3. Well above expectations: Above 1.3%: 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: -0.3% to +0.1%: In this scenario, GBP/USD could drop below one support level.
  5. Well below expectations: Below -0.3%. A very weak reading could hurt the pound, and the pair could fall below a second level of support.


Article: Forex Crunch




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