Pound at key support area, focus on second quarter GDP figure today

Today Second quarter GDP report from UK to be released at 8:30 GMT. UK's GDP is expected to grow at 0.7% on quarterly basis and 2.6% 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 2.9% in first quarter compared to 3.4% estimated. Growth is expected to be 2.6% in second quarter.

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 could spark some relief rally in Pound since it is trading at key support against Dollar.

Pound is currently trading at 1.516 against Dollar, key support area stands at 1.518-1.512 and .5 area is likely to act as high profile psychological support.