Pound awaits GDP reading

Office of National Statistics (ONS) will release preliminary estimate of third quarter GDP estimate. Pound traders are awaiting the release to take further cue from.

Past trends

• UK GDP growth stands highest among developed economies, however that has not been sufficient enough to push pound higher as inflation remained low and services remain the only sector to have grown above pre-crisis level.

• GDP growth reached highest level in second quarter of 2014, reaching 3.2% growth on yearly basis. Since then growth has somewhat waned. In second quarter of 2015, growth was 2.4% y/y.

Expectations today

• Today's reading is expected to show growth at 0.5% q/q and 2.4% y/y.

Impact

• Since this is only a preliminary reading, it will be broadly shrugged off by markets, however it still might impact in the short term.

• Better than expected reading will push pound higher, however sellers are likely to emerge at rallies, since dollar leg is exceptionally stronger. Pound is currently trading at 1.509. Expect strong resistance around 1.515 if data comes better than expected, while 1.5-1.498 area would provide support if data disappoints to downside. Overall bias will remain to downside.