UK GDP preview: What to expect of GBP/USD?
The first estimate of the United Kingdom GDP is expected to have slowed its pace of growth to 0.3% in the third quarter, from the second, when it rose 0.7%. The report is likely to come out above official BOE forecasts and may push back BOE cut rates bets at next week’s policy meeting.
Should the data come in line or better-than with expectations, we could see a knee-jerk upward spike in the cable to 1.23 handle. While a weaker GDP report could trigger a fresh sell-off, sending the cable back towards the lower bound of the recent 200-pips consolidative mode around 1.2100 levels.
Analysts at Danske Bank noted, “Economic data in Q3 has been much better than we feared and expected. We look for GDP growth in the range 0.25-0.50% q/q, with 0.4% being our point estimate (2.2% y/y), driven mainly by services. This is slower than before the EU vote but still a solid growth rate from a global perspective.”
“Financial markets will keep an eye out for news from the run-up to the expected start of negotiations next year over the UK's withdrawal from the EU.”
Deviation impact on GBP/USD
Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 10 and 40 pips in deviations up to 2.5 to -2.5, although in some cases, if notable enough, a deviation can fuel movements of up to 70 pips.
GBP/USD technical levels to watch on data
Haresh Menghani, Analyst at FXStreet notes, “A subsequent weakness back below 1.2200 handle is likely to drag the pair towards 1.2160 horizontal support. A follow through selling pressure below 1.2160 support might now turn the pair vulnerable to head back towards 1.2100 support before a fresh leg of depreciating move takes it back towards flash-crash swing lows support near 1.2000 psychological mark.”
Alternatively, a sustained strength above 1.2250 immediate resistance has the potential to lift the pair beyond 1.2300 handle, towards its next major hurdle near 1.2330 region.”