Trading the News: U.K. Gross Domestic Product (GDP)
Updates to the U.K. Gross Domestic Product (GDP) report may spark a near-term rebound in GBP/USD as the growth rate is expected to increase 1.8% after expanding 1.4% per annum during the last three-months of 2018.
Signs of a resilient economy may push the Bank of England (BoE) to further embark on its hiking-cycle as ‘the Committee continues to judge that, were the economy to develop broadly in line with its Inflation Reportprojections, an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2% target at a conventional horizon.’
In turn, a GDP reading of 1.8% or higher may spark a bullish reaction in the British Pound as it boosts bets for a BoE rate-hike, but a below-forecast print may keep GBP/USD under pressure as it puts pressure on Governor Mark Carney and Co. to drop the hawkish forward-guidance for monetary policy.
Impact that the U.K. GDP report had on GBP/USD during the previous release
(1 Hour post event )
(End of Day post event)
02/11/2019 09:30:00 GMT
4Q 2018 U.K. Gross Domestic Product (GDP)
GBP/USD 15-Minute Chart
The U.K. economy grew 1.3% during the last three-months of 2018 after expanding 1.5% during the previous period, with the gauge for Private Consumption increasing 0.4% for the second consecutive quarter. A deeper look at the report showed business investments contracting 1.4% to mark the biggest decline since 2016, while Government Spending climbed 1.4% in the four-quarter amid forecasts for a 0.5% rise.
The British Pound struggled to hold its ground following the below-forecast GDP print, with GBP/USD slipping below the 1.2900 handle to close the day at 1.2853. Learn more with the DailyFX Advanced Guide for Trading the News.
GBP/USD Rate Daily Chart
- Keep in mind that the broader outlook for GBP/USD is no longer constructive as both price and the Relative Strength Index (RSI) snap the upward trend from late last year after failing to close above the Fibonacci overlap around 1.3310 (100% expansion) to 1.3370 (78.6% expansion).
- It seems as though former channel-support is offering resistance as GBP/USD stages a failed attempt to test the April-high (1.3196), with a break/close below the 1.2950 (23.6% retracement) to 1.3000 (61.8% retracement) region opening up the Fibonacci overlap around 1.2880 (50% retracement) to 1.2890 (23.6% expansion), which largely lines up with the April-low (1.2866).
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— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong.