Trading News for Beginners - What is UK GDP?

April 11, 2022 14:15

 

Newcomers to trading news might be confused by the question: what is UK GDP? There’s no need to worry, this article explains it simply and quickly.  

Gross Domestic Product (GDP) is another way to describe an economy’s performance in terms of growth in productivity and total monetary value.  

An economy is not an abstract concept, it’s a living, breathing ecosystem of jobs, investment, consumer spending and industry. All of the activity from tens of millions of UK citizens feeds into the credibility and value of the Great British Pound (GBP), also known as the Pound Sterling.  

Key points: 

  • The UK economy is the foundation for GBP value 
  • When the economy is growing, the Pound Sterling has support 
  • When the economy is shrinking, the GBP may weaken 

How to trade on UK GDP news 

When the Office of National Statistics (ONS) releases GDP updates, traders study the news to understand which direction the economy is taking. The news is released on a quarterly, half-yearly and yearly basis. 

A news release is received and distributed nearly instantaneously by financial media companies like Dow Jones or Reuters. Depending on how investors and traders react, the news can often cause ripple effects on financial instruments and underlying assets, moving their spot prices up or down. 

Which financial instruments and assets are affected by UK GDP news? 

The instrument: CFDs  

The underlying assets: GBP currency pairs 

Forex traders may trade Contracts for Difference (CFDs) on the GBP currency pairs during economic growth news releases. CFDs can be traded short or long, meaning that even if the news is negative and the economy is shrinking, traders could short (sell) the GBP.  

A successful trade could mean potential returns on the difference between the opening price and the closing price, whether the GBP rises or falls against other currencies. An unsuccessful trade would mean a potential negative return on the price difference.  

The instrument: Stocks 

The underlying assets: Publicly-listed companies 

When the news is positive and the economy is growing, stocks investors may feel more confident and increase the value of their portfolios. By the same token, if the economy is shrinking, investors may change their strategies and become more defensive.  

What’s the key takeaway from this article? 

Remember to watch the financial news for GDP releases because they impact asset prices to a greater or lesser extent. Admirals Trader’s Room provides daily breaking news releases from expert and trusted sources like Dow Jones, in addition to analysis that can help you make informed trading decisions.  

Newcomers to trading should start learning on Admirals Demo Account and use demo funds to test their trading ideas.  

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.