Pound Likely to Extend Gains Post GDP

Pound Likely to Extend Gains Post GDP

27 April 2016, 11:01
Roberto Jacobs

Pound Likely to Extend Gains Post GDP

Pound has just snapped back, finding support around 1.4 area and now up more than 500 pips from there, despite all the fears surrounding a British exit from European Union, after June referendum on 23rd. So far it has been building on the positive news and data, such as U.S. President Barrack Obama’s endorsement for staying and ignored the weaker data and relatively not so good developments. If this is to continue, it is likely to extend its gains post GDP, which will be released by Office of National Statistics (ONS) at 8:30 GMT.

Today’s release is the first flash estimate of first quarter GDP.

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 well 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 last quarter of last year, growth was 2.1% y/y, same as third.

Expectations today –

  • Today, GDP growth is expected to slow down further to 0.4% q/q and 2% y/y.

Impact –

  • If growth comes out better than expected, Pound is likely to test 1.467 resistance today and try to break it, whereas weaker growth could lead to a pause but no reversal. Main focus will turn towards FOMC meeting later today. Pound is currently trading at 1.461 against Dollar.

The material has been provided by InstaForex Company - www.instaforex.com

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