UK GDP Preview: Elevated real estimates and a recent GBP/USD rally point to a downside scenario

The Bank of England (BoE) hinted that the UK economy probably grew at a stronger rate than 0.5% expected – yet that may already be in the price and could trigger a "buy the rumor, sell the fact" response, FXStreet’s Analyst Yohay Elam reports.

Key quotes

“FXStreet's Economic Calendar is pointing to a quarterly increase of 0.5% in GDP. These estimates are likely based on the UK's on/off lockdowns during the turbulent autumn months and uncertainty about Brexit. On the other hand, the BoE provided a more upbeat estimate.”

“There is a good chance that GDP beats the estimates on the calendar but fails to exceed real, higher ones, and that may lead to a sell-off in the pound.” 

“Sterling may suffer selling pressure after a rally that may have gone too far, too fast. Several indicators such as the Relative Strength Index on the 4-hour chart are pointing to overbought conditions. While some of the rises is related to dollar weakness rather than high-expectations for UK GDP, the result will likely be similar.”