27 Apr 2016
UK prelim GDP preview: What to expect of GBP/USD?
The GBP/USD pair appears to have found renewed just above the mid-point of 1.45 handle and now takes on the recovery mode towards daily tops reached previously at 1.4596. The cable remains pressured this Wednesday as markets are expecting a weaker UK GDP print in wake of the EU referendum. The first estimate of UK’s Q1 2016 GDP will published at 08.30GMT.
UK GDP: Pace of growth to slow in Q1 2016
The GDP growth rate is expected to have slow to 0.4% in Q1 2016, down from 0.6% seen in the last quarter of 2015, on the back of global headwinds, oil price declines and looming Brexit concerns.
The most recent PMIs for services, manufacturing and construction in the UK have confirmed a slowdown in the economy during the first quarter, justifying expectations of a 0.4% expansion in economic growth.
Should the data come in line with expectations, we could see a brief downward spike in the cable, which is expected to be quickly reversed, given the recent bullish momentum, underpinned by easing fears of the Britain exiting EU’s membership. While a better-than expected GDP reading could trigger a fresh rally in GBP/USD, driving the prices back towards two-month tops. However, the reaction to the data is expected to be limited as the FOMC outcome takes centrestage in today’s trading session.
Banks’ views
Nomura: " UK GDP (Wednesday): We expect the ONS’s first estimate of Q1 GDP to be 0.5% q-o-q, driven by the sustained strength of the services sector."
Westpac: "UK Q1 advance GDP is expected at 0.4% q/q, 2.0% y/y. Growth has been slowing since mid-2014, and manufacturing has been particularly soft."
TD Securities: “While growth is likely to slow from the 0.6% Q/Q in Q4, we see only a one-tenth deceleration to 0.5%, which presents upside risks relative to consensus expectations of 0.4%. We would expect to see some confidence and delayed investment effects show up in a further deceleration to the Q2 data, just not yet.”
GBP/USD: Technical Levels
Haresh Menghani, Analyst at FXStreet notes, “On daily chart, the pair tested its immediate key resistance near 1.4640-50 area, representing 38.2% Fibonacci retracement level of 1.5930-1.3835 downslide. Also on H4 chart the 1.4640 resistance area coincides with a short-term ascending trend-channel resistance.”
“With H4 RSI already reading above 70 and ahead of the key event risks, the pair might witness some profit-taking move towards 1.4550 level. Additional weakness below 1.4550 level is likely to be limited by the ascending trend-channel support near 1.4480-75 area.”
“On the upside, move back above 1.4600 round figure mark might continue to face resistance at 38.2% Fibonacci retracement level near 1.4640 area. This is closely followed by a hurdle at Feb. 2016 high level near 1.4675-80 area, also coinciding with the trend-channel resistance.”
UK GDP: Pace of growth to slow in Q1 2016
The GDP growth rate is expected to have slow to 0.4% in Q1 2016, down from 0.6% seen in the last quarter of 2015, on the back of global headwinds, oil price declines and looming Brexit concerns.
The most recent PMIs for services, manufacturing and construction in the UK have confirmed a slowdown in the economy during the first quarter, justifying expectations of a 0.4% expansion in economic growth.
Should the data come in line with expectations, we could see a brief downward spike in the cable, which is expected to be quickly reversed, given the recent bullish momentum, underpinned by easing fears of the Britain exiting EU’s membership. While a better-than expected GDP reading could trigger a fresh rally in GBP/USD, driving the prices back towards two-month tops. However, the reaction to the data is expected to be limited as the FOMC outcome takes centrestage in today’s trading session.
Banks’ views
Nomura: " UK GDP (Wednesday): We expect the ONS’s first estimate of Q1 GDP to be 0.5% q-o-q, driven by the sustained strength of the services sector."
Westpac: "UK Q1 advance GDP is expected at 0.4% q/q, 2.0% y/y. Growth has been slowing since mid-2014, and manufacturing has been particularly soft."
TD Securities: “While growth is likely to slow from the 0.6% Q/Q in Q4, we see only a one-tenth deceleration to 0.5%, which presents upside risks relative to consensus expectations of 0.4%. We would expect to see some confidence and delayed investment effects show up in a further deceleration to the Q2 data, just not yet.”
GBP/USD: Technical Levels
Haresh Menghani, Analyst at FXStreet notes, “On daily chart, the pair tested its immediate key resistance near 1.4640-50 area, representing 38.2% Fibonacci retracement level of 1.5930-1.3835 downslide. Also on H4 chart the 1.4640 resistance area coincides with a short-term ascending trend-channel resistance.”
“With H4 RSI already reading above 70 and ahead of the key event risks, the pair might witness some profit-taking move towards 1.4550 level. Additional weakness below 1.4550 level is likely to be limited by the ascending trend-channel support near 1.4480-75 area.”
“On the upside, move back above 1.4600 round figure mark might continue to face resistance at 38.2% Fibonacci retracement level near 1.4640 area. This is closely followed by a hurdle at Feb. 2016 high level near 1.4675-80 area, also coinciding with the trend-channel resistance.”