[B][U]What is Expected[/U][/B]
Time of release: [B] 04:30 EST, 8:30 GMT 7/20/2007[/B]
Primary Pair Impact : [B] GBP/USD
[/B]Expected: [B]2.9%
[/B]Previous: [B]3.0%[/B]
[B][U]How To Trade This?[/U][/B]
There are few indicators that are universally important for all currencies at any given time. However, one of those indicators just happens to be the quarterly growth report. In terms of fundamental clout, the growth number is used as for relative a bare bones comparison between economies and their currencies? valuations as well as for speculating on all-important rate decisions. For the British GDP report there are a few market pre-conceptions to this indicator to be aware of. The most obvious angle to this indicator is the consensus for a modest deceleration to a 2.9 percent pace from the final reading of the first quarter data. This will clearly cast the report in a somewhat bearish light. At the same time, the headline number may be overlooked in favor of unexpected changes in the component numbers. With trader actively looking for the plugs for strong growth and the fuel for future rates hikes, a strong report from consumer spending and housing could turn a disappointment into a pleasant surprise. Another issue to take note of is this indicators lack of volatility recently. If the actual print is two-tenths of a percentage above or below the consensus, it could spur big moves like the one seen in the third quarter of 2006.
A strong reaction on a positive report will be in a sense fighting gravity. The market is already setup for a disappointment, so a good number will be performing for a skeptical crowd. A reading two-tenths of a percentage point or more better than the consensus would be a strong hawkish signal by itself. Under the usual lack of volatility, a modest improvement would need confirmation from consumer spending and housing components. Even if all the ingredients are there, the overbought sentiment surrounding GBPUSD could limit gains.
For a setup, a disappointment is already in focus for pound traders. Not only have economists put in the official forecast for a deceleration in the stalwart UK growth report, but the pair has also pulled off its recent highs after putting a notable range of upper wicks. A modest slowdown in the annual report has likely already been stripped of its edge. A 2.8 percent read or lower would really be needed for a strong GBPUSD retracement. Under such conditions, go short two lots on confirmation of a five-minute red candle. Take profit on one lot on a move that is equivalent to risk, while reserving the second for a discretionary target further out.
