UK Second Estimate GDP, one of the most important economic releases, is published each quarter. GDP measures production and growth of the economy, and is considered by analysts as one the most important indicators of economic activity. A reading which is better than the market forecast is bullish for the pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Indicator Background

British Second Estimate GDP is a key economic indicator, and provides an excellent indication of the health and direction of the British economy. It follows the release Preliminary GDP, which was released in January. Traders should pay close attention to the GDP release, as an unexpected reading could affect the direction of GBP/USD.

Preliminary GDP in Q3 posted a gain of 0.6%, edging above the estimate of 0.5%. The estimate for Second Estimate GDP remains at 0.6%.

Sentiments and levels

Janet Yellen presented lawmakers with a positive assessment of the US economy, and strongly hinted that another rate hike is coming in the first half of 2017. In the UK, the BoE appears in no rush to raise rates, even with inflation moving higher. So, monetary divergence favors the greenback. Thus, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.2775, 1.2674, 1.2511, 1.2385, 1.2218 and 1.2080

5 Scenarios

1. Within expectations: 0.3% to 0.9%. In such a scenario, GBP/USD is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 1.0% to 1.4%: An unexpected higher reading can push the pair above one resistance line.
3. Well above expectations: Above 1.4%: A surge in GDP would push the pound higher and the pair could break a second line of resistance as a result.
4. Below expectations: -0.2% to +0.2%: In this scenario, GBP/USD could drop below one support level.
5. Well below expectations: Below -0.2%. A very weak reading could hurt the pound, and the pair could fall below a second level of support.