Diffraction gratings have been proposed as core elements in future laser-interferometric gravitational wave detectors. In this paper, we use a steady-state technique to derive coupling of lateral grating displacement to the output ports of a diffractive Fabry-Perot cavity. By introducing a signal to noise ratio (SNR) for each of the three cavity output ports, the magnitudes of the noise sidebands originating from lateral grating displacement are compared to the magnitude of a potential gravitational wave signal. For the example of a 3km long Fabry-Perot cavity featuring parameters similar to the planned Advanced Virgo instrument, we found that the forward-reflecting grating port offers the highest SNR at low frequencies. Furthermore, for this example suspension requirements for lateral isolation were computed, and a factor of 20 relaxation at a frequency of 10Hz can be gained over the transmitted port by observing the forward-reflected port. © 2009 IOP Publishing Ltd.