GDP figure set to decide Pound’s mood ahead of FOMC

Today flash estimate of third quarter GDP report from UK to be released at 9:30 GMT. UK's GDP is expected to grow at 0.6% on quarterly basis and 2.4% y/y.

Why the GDP figure crucial?

• Gross domestic product (GDP) growth represents overall growth of that country, which is vital for its assets such as stocks, bonds, currency, real estate etc.

For UK it is of high importance since Bank of England (BOE) is relying on strong GDP figures as well as strong wage growth to support the case for rate hike to be next plausible policy measure in absence of inflation.

Previous trend and expectation today -

• UK's GDP growth has picked up sharply in 2013 and reached from around just about 0.5% (annual growth rate) to 3% by 2015.
• This year however, GDP growth though still robust enough, is showing some signs of slowdown. Growth has slowed to 2.4% in second quarter and further weakness is possible.
• GDP is expected to grow at 0.6% pace on quarterly basis and 2.4% y/y.

Impact -

• Impact could be pretty negative, if GDP figure disappoints to the downside. Any big disappointments in GDP figure once again might spark risk aversion over global growth fear.
• Whereas better than expected figure would put pound in comfortable position ahead of FOMC meeting and announcement tomorrow.

Pound is currently trading at 1.534 against Dollar, key support area stands at 1.518-1.512 and 1.53 area whereas 1.55 is likely to act as high profile psychological support ahead of FOMC.