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- 3Q U.K. GDP to Expand Another Annualized 2.4%- Slowest Since 3Q 2013.
- Will Stronger GDP Spur Larger Dissent Within the Bank of England (BoE)?
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Trading the News: U.K. Gross Domestic Product (GDP)
The U.K.’s Gross Domestic Product (GDP) report may heighten the appeal of the sterling and spur a larger rebound in GBP/USD as the economy is expected to expand another annualized 2.4% in the third-quarter of 2015.
What’s Expected:
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Why Is This Event Important:
Even though the economy grows at the slowest pace in since 2013, data prints pointing to a more sustainable recovery may keep the Bank of England (BoE) on course to normalize monetary over the near to medium-term and generate a greater dissent within the central bank as the outlook for growth and inflation improves.
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Expectations: Bullish Argument/Scenario
| Release | Expected | Actual |
| Retail Sales ex Auto Fuel (MoM) (SEP) | 0.4% | 1.7% |
| Industrial Production (MoM) (AUG) | 0.3% | 1.0% |
| Mortgage Approvals (AUG) | 69.8K | 71.0K |
The pickup in private-sector consumption accompanied the rise in business outputs may offer a better-than-expected GDP print, and signs of a stronger recovery may encourage a bullish reaction in GBP/USD as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
| Release | Expected | Actual |
| Jobless Claims Change (SEP) | -2.2K | 4.6K |
| Average Weekly Earnings ex. Bonus (3MoY) (AUG) | 3.0% | 2.8% |
| Trade Balance (AUG) | -2.150B | -3.268B |
Nevertheless, waning demand from abroad paired with the slowdown in job growth may drag on the real economy, and a dismal report may push the BoE to further delay its normalization cycle in an effort to further mitigate the downside risks surrounding the region.
How To Trade This Event Risk(Video)
Bullish GBP Trade: U.K. Economy Expands Another 2.4% or Greater
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Need green, five-minute candle following the GDP report to consider a long British Pound trade.
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If market reaction favors bullish sterling trade, long GBP/USD with two separate position.
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Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
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Move stop to entry on remaining position once initial target is hit, set reasonable limit.
Bearish GBP Trade: 3Q GDP Report Disappoints
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Need red, five-minute candle to favor a short GBP/USD trade.
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Implement same setup as the bullish British Pound trade, just in the opposite direction.