The GDP data is expected to show the British economy shrank 0.2% in the three months to June from the same period last year, which would confirm that the UK economy contracted for a third consecutive quarter, as the recession continues.
If the recession has indeed deepened, GBP may see a sharp selloff as the case for additional quantitative easing strengthens. As David Song, Currency Analyst at DailyFX explains: “As the economic downturn raises the risk of undershooting the 2% target for inflation, we may see the Bank of England continue to strike a dovish tone for monetary policy, and the central bank may show a greater willingness to expand its balance sheet further in an effort to stem the downside risks for the region.”
Technically speaking, if we consider the 4-hour chart “the outlook is more bearish as 20 SMA cross over 200 EMA upside down as indicators stand in bearish territory,” explains Valeria Bednarik, Chief Analyst at FXstreet.com. “Key support continues to be the 1.5440 level, with a clear break below opening doors for a retest of the 1.5260 price zone.”