Henry Liu
Former FPA Special Consultant
- Messages
- 473
UK quarterly GDP release is always a high impact report. With this being the Prelim release, or the first release of three, we are likely to see more market participation. Here is the forecast number:
UK Prelim GDP q/q Forecast 0.6% Previous 0.3%
ACTION: (GBP/USD) BUY 0.8% SELL 0.3%
The Trade Plan
Our deviation for today's trade is 0.3% to SELL and 0.2% to BUY. We’ll look to possibly SELL GBP/USD at 0.3% of release figure or worse; BUY GBP/USD at 0.8% of release figure or better. This will be the 3rd consecutive quarter of positive GDP release from UK, and if we do end up with a positive release, it means that the economic recovery in UK is gaining momentum. If we get a 1.0% or even better release, expect to see some huge market reaction bidding for Sterling.
Depending on the surprise of this release, we could go from after news retracement trade to spike trading. I believe if we get a 1.0% or better release, it justifies spiking trading. If we get 0.8%, then we should follow the retracement trading rule as seen below:
Henry's Retracement Trading Method
Due to the "Buy on rumor Sell on news" market reaction, we could see some demand in the GBP prior to the release. It is possible to BUY GBP during the overnight Asian session if you see a dip in the market...
The Market
Medium Forecast sits at 0.6% out of 32 analysts surveyed by Bloomberg. The feelings on the street are that the 2nd half of 2010 is going to be a tough one, but at least for this release we should see some strong readings.
BOE official Andrew Sentance wanted to hike interest rates during last BOE rate decision citing inflation and economic expansion as revealed in the MPC meeting minutes on Wednesday, but was voted down due to concerns over the recent budget cuts which may increase risk of another slowdown in the economy. Current market condition is neutral on the future direction of Sterling.
Additional Thoughts
Since the Prelim GDP is the first release of the quarterly GDP, it’s usually the one with most potential for surprises. This is the most important news event for UK in this week, and a highly anticipated one.
Unless we get a strong reading, the after release market may be difficult to predict. On one hand we could be looking at the best GDP release for some time, as the 2nd Quarter GDP expectation rose on the back of series of positive data from UK and perhaps with the help of World Cup. However, with budget and spending cuts to look forward to, the future for UK's economy is bleak at best. Although I do not expect to see a strong decline in UK's fundamentals in the immediate future, fundamental traders and speculators are surely considering these factors.
Definition
UK Prelim GDP q/q for Q2 2010 is expected to be a positive release of 0.6% surveyed by Bloomberg. GDP is defined as “the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time.” GDP is the basically direct measure of the economy’s health, and a stronger GDP means that the central bank will more likely to raise interest to curb inflation.
For historical data and charts on UK Prelim GDP q/q:
Historical Data & Charts UK GDP q/q
Thanks,
UK Prelim GDP q/q Forecast 0.6% Previous 0.3%
ACTION: (GBP/USD) BUY 0.8% SELL 0.3%
The Trade Plan
Our deviation for today's trade is 0.3% to SELL and 0.2% to BUY. We’ll look to possibly SELL GBP/USD at 0.3% of release figure or worse; BUY GBP/USD at 0.8% of release figure or better. This will be the 3rd consecutive quarter of positive GDP release from UK, and if we do end up with a positive release, it means that the economic recovery in UK is gaining momentum. If we get a 1.0% or even better release, expect to see some huge market reaction bidding for Sterling.
Depending on the surprise of this release, we could go from after news retracement trade to spike trading. I believe if we get a 1.0% or better release, it justifies spiking trading. If we get 0.8%, then we should follow the retracement trading rule as seen below:
Henry's Retracement Trading Method
Due to the "Buy on rumor Sell on news" market reaction, we could see some demand in the GBP prior to the release. It is possible to BUY GBP during the overnight Asian session if you see a dip in the market...
The Market
Medium Forecast sits at 0.6% out of 32 analysts surveyed by Bloomberg. The feelings on the street are that the 2nd half of 2010 is going to be a tough one, but at least for this release we should see some strong readings.
BOE official Andrew Sentance wanted to hike interest rates during last BOE rate decision citing inflation and economic expansion as revealed in the MPC meeting minutes on Wednesday, but was voted down due to concerns over the recent budget cuts which may increase risk of another slowdown in the economy. Current market condition is neutral on the future direction of Sterling.
Additional Thoughts
Since the Prelim GDP is the first release of the quarterly GDP, it’s usually the one with most potential for surprises. This is the most important news event for UK in this week, and a highly anticipated one.
Unless we get a strong reading, the after release market may be difficult to predict. On one hand we could be looking at the best GDP release for some time, as the 2nd Quarter GDP expectation rose on the back of series of positive data from UK and perhaps with the help of World Cup. However, with budget and spending cuts to look forward to, the future for UK's economy is bleak at best. Although I do not expect to see a strong decline in UK's fundamentals in the immediate future, fundamental traders and speculators are surely considering these factors.
Definition
UK Prelim GDP q/q for Q2 2010 is expected to be a positive release of 0.6% surveyed by Bloomberg. GDP is defined as “the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time.” GDP is the basically direct measure of the economy’s health, and a stronger GDP means that the central bank will more likely to raise interest to curb inflation.
For historical data and charts on UK Prelim GDP q/q:
Historical Data & Charts UK GDP q/q
Thanks,
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