Waiting For the UK GDP Numbers – Is GBP Going Up or Down?

Posted Thursday, October 27, 2016 by
Skerdian Meta • 2 min read

Before the Brexit referendum, the UK was in a very good position when it came to economic recovery. The GDP for the second quarter came out at 0.6% at first, but it was later revised to 0.7%. That brings the yearly GDP number 2.8% if you annualize it, which is more than many countries and the highest GDP increase among the developed ones. 

However, the Brexit referendum came and everything went straight into the rubbish bin. All economic activity has slowed and we might even see another contraction of the British economy at some point, after the recession most of the world economies went through during the global financial crisis.

The UK GDP data is about to be released in about half an hour. The expectations are for a 0.3% expansion, which shows the steep dive the British economy is going through; slashing your economic growth by more than half from one quarter to the other while voting to get out of the EU doesn´t seem such a wise thing to do now.

But that´s just the beginning. There´s a lot more to come in the upcoming months and years. Today's UK GDP data will show us how fast the UK economy is cooling off and what to expect in the future.

Although the market is expecting the worse, the risk still is on the downside. If the number is impressive, then I expect to see a rally in GBP pairs. But, that won´t last because it won´t change anything regarding Brexit. It might last a few hours or a few session but the buyers will sooner or later come to the conclusion that the worst is yet to come for the UK when the Article 50 is triggered.

Ideally, I would prefer GBP/USD to shoot higher to 1.2600-50 so I could open a long term sell forex signal in this forex pair. That´s a bit far-fetched but the volatility we have seen in GBP pairs recently can make this trade idea possible even today.

Alternatively, if the numbers are disappointing, the GBP buyers will run for the hills and the sellers would pile in even faster. The expected GDP number is already less than half of last quarter´s number. So, if it comes out even worse, then the first thing that springs to mind is that the coming quarters will be even worse. I don´t know if I can be fast enough to open a forex trade/signal if the number is disappointing. However, I expect GBP/USD to get to 1.19 soon and then 1.15, if that´s the case, because the negative sentiment towards the GBP is immense and a disappointing GDP number would accumulate fear for the future of the UK economy and the GBP.  

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