DowJones Above 20K
Despite the fact that there were few significant economic releases yesterday, volatility has increased significantly as the DowJones Industrial Average has finally surpassed 20K barrier and continued to rise all the way above 20,050. Such a break has put some pressure on the US Dollar Index, which broke through 100.0 barrier and closed the day below that solid support, which increases the possibility for another leg lower ahead.
As for today, Another day with few economic releases ahead in Europe and the US session. However, some of the data are expected to have a notable impact on the markets, especially the one from the UK. In today’s article, we will take a quick look at the upcoming releases from the UK, what’re the expectations and the possible impact on GBP pairs.
Expectations
| Indicator |
Forecast |
Prior |
| Initial GDP |
0.5% |
0.6% |
| BBA Mortgage Approvals |
41.1K |
40.7K |
| Index of Services |
0.9% |
1.0% |
| CBI Realized Sales |
28 |
35 |
What Does It Mean?
The initial GDP measures the change in the inflation-adjusted value of all goods and services produced by the economy. This is also released on a quarterly basis, about 26 days after the quarter ends.
There are 3 versions of GDP released a month apart – Preliminary, Second Estimate, and Final. The Preliminary release is the earliest and thus tends to have the most impact.
As for the rest of the data, they are unlikely to have a major impact on the markets, as the GDP matters the most today.
Briefly, the BBA Mortgage Approvals index measures the number of new mortgages approved for home purchase by BBA-represented banks during the previous month.
The Index of Services measures the change in the total Gross Value Added of the private and government services sectors.
Finally, the CBI Realized Sales is considered as a survey to measure the level of a diffusion index based on surveyed retailers and wholesalers.
Why Is This Important?
GDP: It’s the broadest measure of economic activity and the primary gauge of the economy’s health.
Despite the fact that the GDP is the most important number to watch today, the rest of the data are still important as the BBA Mortgage Approvals is a leading indicator for the housing market, while the CBI Realized Sales is considered as a leading indicator of consumer spending because retailer and wholesaler sale are directly influenced by consumer buying levels.
Impact on GBP Pairs
The estimates today are pointing to a slowing down in Q4 of last year, which is the first quarter after Brexit. In Q3 the economy grew by 0.6%, while it is expected to show a slowing down to 0.5% in Q4. There is a possibility for a faster slowing given the fact of the uncertainty toward Brexit since the referendum.
Moreover, traders should keep in mind that Brexit impact is not here yet. The UK is still operating as a member of the EU. The biggest impact on the economy would be more clear when the exit is triggered.
GBP strength may continue in the coming days, even if the GDP slowed. This is due to the ongoing dialogue in the British parliament regarding the Brexit negotiations, as the parliament dialogue would take a lot of time and most likely to delay the negotiations with the EU.
Levels To Watch
| Symbol | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
| GBPUSD | 1.2378 | 1.2433 | 1.2533 | 1.2588 | 1.2688 | 1.2743 | 1.2843 |
| GBPJPY | 139.98 | 140.87 | 142.00 | 142.89 | 144.02 | 144.91 | 146.04 |
| GBPAUD | 1.6278 | 1.6377 | 1.6531 | 1.6630 | 1.6784 | 1.6883 | 1.7037 |
| GBPCHF | 1.2407 | 1.2459 | 1.2543 | 1.2595 | 1.2679 | 1.2731 | 1.2815 |
| GBPNZD | 1.7023 | 1.7133 | 1.7222 | 1.7332 | 1.7421 | 1.7531 | 1.7620 |
| GBPCAD | 1.6300 | 1.6358 | 1.6436 | 1.6494 | 1.6572 | 1.6630 | 1.6708 |
