UK Gross Domestic Product Preview: Good news, old news

UK economic growth is foreseen at 19.8% in the three months to September.
The lack of progress in Brexit talks and a second lockdown likely to undermine the pound.
GBP/USD is neutral-to-bullish according to technical readings and could approach 1.3400.

Valeria Bednarik FXStreet

The United Kingdom will report the preliminary estimate of its Q3 Gross Domestic Product this Thursday, and the figure is expected to indicate a nice comeback in the three months to September. After falling by 19.8% in Q2, the GDP is expected to print 15.8%.

Brexit and Coronavirus

Indeed, the release could trigger some action around GBP crosses, but it’s unlikely that it could provide sustainable support to sterling, even if the number beats expectations. There are two main reasons why the numbers may fail to impress. The first one is that the news is old news. The GDP is measuring numbers from before the latest lockdown, which means that an economic setback in Q4 will likely revert any possible recovery from the third quarter.

The other reason is Brexit talks. Once again, and with a few weeks ahead to the definitive dead-line, negotiations continue and will extend beyond mid-November. Representatives from the EU and the UK said they could reach a deal, although the key issues still undefined are the same they have been discussing since the year started.

GBP/USD technical outlook

The GBP/USD pair is trading around 1.3230, pulling back from the 1.3300 area amid Brexit jitters. According to the daily chart, the pair is neutral-to-bullish, as technical indicators hold above their midlines, although lacking directional strength. The pair develops above all of its moving averages in the same chart, which offer modest bullish slopes.

The pair could get a boost from upbeat readings and approach the 1.3360 resistance area. On the other hand, a discouraging outcome may see it plummeting towards the 1.3100 level, as negative news will tend to have a larger impact on the pound until a Brexit-deal gets done.

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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