How to Trade the GDP Report
Friday morning brings the GDP report , and it's coming on the heels of weak data. Here's how to play it.
Ready for the GDP report?
Recent economic reports suggest it could be anything but rosy - but then again, you never know.
That's why Andrew Busch, global currency and public policy strategist for BMO Capital, has a two-part plan.
"For currency trading, you always want to have a playbook - if the number's better than expected, I want to do this, if the number's worse than expected, I want to do that," he told CNBC's Scott Wapner.
In this case, if GDP growth comes in over 2.5%, signaling a bullish outlook for the economy, Busch thinks that will hurt the New Zealand dollar. Central bankers there just issued a warning about the currency's excessive strength, and they might cut interest rates if they think it is poised to rise further on an improving U.S. economy.
On the other hand, GDP growth under 2% could spur the Fed to action, Busch says. "it's QE3, and we want to buy a country's currency that's really going to see growth go up with the United States, and that's Mexico's."
If the second scenario becomes reality, Busch wants to sell the dollar against the Mexican peso at 13.25, setting a stop at 13.30 and a target of 13.03.
You can watch the discussion on the video.
Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.
Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.
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