Tomorrow’s gross domestic product figure is expected to remain the same for the third quarter, as it remains a simple revision. However, the survey still carries with it volatility for the morning, which could hurt the British pound in the short term. Here’s what to expect.
UK GDP Growth Rises by 1% or More
The anticipated outcome, a 1% expansion in underlying growth would fortify what was seen in the earlier third quarter assessment and bolster expectations for not only the final reading but also the fourth quarter and yearly figures. All in all, it would keep annualized expansion at unchanged to slightly positive, allowing the UK to beat current expectations of further contraction. It would also help to alleviate fears that further monetary easing would be forthcoming as the BOE is less likely to ease in the face of a recovery.
Meeting expectations should help underlying sterling bullishness, forcing a retest of the 1.6100 psychological barrier. The momentum could prompt a close higher, which would immediately expose the 1.6300 resistance barrier to an advance.
UK GDP Growth Rises Less Than 1%
A not all too unlikely scenario as weakness was seen in the earlier version of the report the last time around. Although consumer spending helped the quarterly figure to rise, pullbacks in corporate investment and government spending held any real surge to a minimum in the 3-month period. Should these shortfalls continue to persist, they would contribute to erosion of overall growth, resulting in a less than expected figure. Unfortunately, this would spell disaster for the UK economy, likely spurring speculation of further easing considerations by the country’s monetary body.
The bearish fundamental outcome would reinforce resistance in GBPUSD at 1.6075 and likely prompt a move lower to initial support at 1.5835. A subsequent break lower would activate targets lower at 1.5779.
Source: FXTrek Intellicharts