UK GDPReuters

The British pound traded weak against most majors on Friday ahead of the gross domestic product data from the UK later in the day.

The Q1 GDP may have grown 3.1% on year, stronger than the 2.7% growth recorded in the previous quarter, data at 8:30GMT may show. On a quarterly basis, analysts predict 0.8% growth from 0.7% in Q4-2013.

The country's current account deficit, due at the same time as of the GDP data, may have shrunk to GBP17.5bn in Q1 from GBP22.4bn in the previous quarter, as per the market estimate.

The UK economy has staged a strong recovery over the past year and most analysts expect this to continue in 2014-15.

"Most sectors and regions of the economy are now showing positive growth trends, with recent signs that business investment is also starting to pick up. In the longer term, reshoring could also boost output and employment in both manufacturing and services," a research report from the accounting and financial services firm PricewaterhouseCoopers shows.

Strong Sterling

The British pound has been on a rising trend against the dollar, euro, yen and the Swiss franc since early 2013, and it has touched fresh multi-year highs versus all of them in June.

The main driver of the sterling rally is the relatively strong economic position of the UK compared to the rest of the developed world, and of late, strong rate hike indications from the Bank of England have added fuel to the currency's rise.

After a blunt statement by BoE governor Mark Carney on 12 June that the central bank is likely to hike the bank rate sooner than the market estimates, sterling jumped across the board.

However, the inflation report that came on 18 June highlighted some conditions like spare capacity utilisation before monetary policy is actually tightened, leading to a reversal of some of its gains.

On Thursday, the Financial Stability Report for June spoke about risks associated with low interest rates and the sterling turned north again.

Now, if the Q1 GDP surprises on the higher side, the British currency will be up for new highs versus majors.

Technical Outlook

The GBP/USD rose to 1.7052 on Friday, extending Thursday's gains, and the pair is now just 14 pips away from the five-year high touched on 19 June.

Above 1.7064, the GBP/USD will target 1.7350, the 50% retracement of the November 2007 to January 2009 downtrend, ahead of the 61.8% level of 1.8265.

A break of that will open 1.8700, 1.9000 and 1.9480 ahead of the 2.0 mark, last touched in November 2007.

The pair has its first support at 1.6920 ahead of the 1.6738-1.6693 area. What comes next will be the 1.6554-1.6462 zone in the short term.

The EUR/GBP rose to 0.8000 on Friday after falling to 0.7982 on the FSR release. The cross had fallen to a 20-month low of 0.7958 on 16 June before edging back up to 0.8036, a 13-day high, by Wednesday.

With the fall on Thursday, levels such as 0.7923 and 0.7987 are in focus on the downside, ahead of the 2012 low of 0.7756.

The GBP/JPY eased to 172.69 on Friday from 173.22 at Thursday's close, helped by broad yen strength after the higher than expected inflation data from Japan.

The pair has not distanced much from the five-month high of 174.14 on 20 June, and a rise above 174.87 will take it to a new five-year high.

On the downside, the 172-171 area gives immediate support ahead of 169.55 and the more important 167.77.

GBP/JPY supports ahead of UK GDP dataIB Times UK/FXStreet