0430 UK GDP q/q prelim (-0.5% expected,-0.5% prior,-0.6% to -0.2% range)
Affliated Reports:
UK GDP y/y final (1.7% expected, 1.7% prior, 1.6% to 2.0% range)
Last month's release was a shockingly low number, giving us a -1.0 deviation which triggered a
conservative sell signal. The pound dropped 80 pips in the 1st minute and then continued on down
for another 60 over the next hour. Normally a deviation of just +/-0.3 is enough of a trigger
for a decent move. Over the past month since the last release, the PMI figures for Construction,
Services & Manufacturing, however these figures were released at the beginning of the month, but
they were all 3-4 points higher. Last week's Retail Sales was higher. The low reading last month
was blamed on the coldest weather in a century during December, and although many were cynical
of that explanation, it could actually be the case, at least this is what the leading indicators
are showing. All this sets the stage for today's release, with expectations still at -0.5 which
was last month's advanced reading. This is the revised release, and next month is the final
release. Usually the advanced reading has the most possibility of a deviation and resultant
price action, followed by this release. The range of estimates are quiet tight, especially on
the lower end, this could hint that some modest improvement in the number is expected, so even a
-0.2 deviation would put the number below the worst estimate, so possibly more aggressive trader
could tighten their lower deviation trigger.October 2010 was the last time we had a deviation
before last month, and the deviation is closer to what you might expect from this news, also a
nice 35 pip spike in the 1st minute, followed by a continuous extension with little retracement
for the next half hour for an additional 45 pips
It it comes out at -0.2% or higher, GBP/USD should rally 40 pips.
If it comes out at -0.8% or lower, GBP/USD should drop 40 pips.
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0830 US GDP Annualized Advanced (3.3% expected,3.2% prior,3.0% to 4.4% range)
Affliated Reports:
US GDP Price Index (0.3% exptected, 0.3% prior, 0.3% to 1.2% range)
US Core PCE q/q (0.4% expected, 0.4% prior, 0.3% to 0.4% range)
US Personal Consumption (4.2% expected, 4.4% prior, 4.1% to 4.5% range)
While even a +/-0.2 deviation has worked in the past, such as the August 2010 release
which moved the USDJPY 45 pips, other time deviations of +/-0.3 or +/-0.4 have not
really done much, perhaps a 15-20 pip move. Last month this number came out with a
-0.3 deviation, and it only blipped down 15 pips quickly and came back 20 pips above
prerelease, however eased back down again as the US stock market opened. Triggers of
+/-0.4 where recommended last month and kept us out of the trade, but it is wise to
be more careful with this data and widen them out a bit more to +/-0.5. Perhaps such
a deviation is unlikely however in Jan 2010 there was +1.0 deviation on this one, a bit
like the UK GDP last month, and there was a 50 pip move. In December 2009, a -0.6
caused a 30 pip move. In both cases price later rebounded as the US Stock market
opened and usually there is some 10am data. Be nimble and take profit quickly if
necessary, however with a deviation of 0.5 it is likely price will maintain after
its initial spike for at least a few minutes.
If it comes out at 3.8% or higher, USD/JPY should rally 25-45 pips.
If it comes out at 2.0% or lower, USD/JPY should fall 25-45 pips.
Futures traders can also trade the EMini S&P on this release.
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