Pound awaits GDP reading

Office of National Statistics (ONS) will release preliminary estimate of first 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.

• In fourth quarter UK GDP surprised to the upside. GDP grew by 0.6% q/q and 3% from a year ago.

Expectations today -

• Prior to this, April estimate showed that GDP is expected to grow by 0.3% in the first quarter. However today second reading is expected to improve on the first preliminary reading. Today's reading is expected to show growth at 0.4% q/q and 2.4% y/y.

Impact -

• Since this is only a preliminary reading, it will be 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 1.538. Expect strong resistance around 1.542 if data comes better than expected, while 1.532 would provide support if data disappoints to downside. Overall bias will remain to downside.