UK inflation preview: Can a second positive piece of data lift GBP/USD?

UK inflation has likely risen in March back to the target.
The BOE is still paralyzed by Brexit but will take note.
With Brexit on break, a second consecutive positive number may already lift the pound.

Yohay Elam FXStreet

The UK publishes its inflation report on Wednesday, April 17th, at 8:30 GMT. The headline Consumer Price Index (CPI) stood at 1.9% YoY in February, just below the Bank of England's 2% target. Core CPI was just 0.1% behind with 1.8%. Both figures were off the highs.

Expectations for March stand at a tick higher for both measures: CPI to 2% and Core CPI to 1.9%. The recent pickup in oil prices can explain the higher expectations for the headline, but other reasons are behind higher expectations for the core number.

The BOE would like to raise rates in order to get ahead of the curve on inflation: prevent an overheating. Moreover, wages are outpacing inflation quite significantly, with a rise of 3.5% in February reported just now.

However, Brexit paralyzes all policymaking in the UK, and this includes the central bank. The Old Lady will not budge until it receives some political clarity. Brexit also paralyzes price reaction to economic figures. The pound moved only temporarily and in a limited scope before the next Brexit-related headline rocked it.

GBP/USD reaction - upside bias

The poor reaction function has not changed in the first post-Halloween extension release. Last week's EU Summit resulted in a long delay of Brexit through the end of October. Nevertheless, the release of the jobs data on Tuesday did not trigger any substantial move. However, the lack of action can also be attributed to the lack of surprise: both wages and the unemployment rate came bang on expectations.

Will the response to inflation be different? There is a good reason to believe it will. In both the employment figures and inflation ones, expectations are for robust numbers. So, even if there are no surprises, the accumulation of upbeat figures could trigger a positive reaction in GBP/USD.

It is also important to note that markets are calm, and the US Dollar does not enjoy safe-haven flows. On this background, the bias is in favor of rises in cable.

The pound may also dismiss a small miss in the figures. It would probably take a deceleration in inflation, from 1.9% to 1.8% on the headline to send Sterling lower.

Conclusion

UK inflation is forecast to have accelerated in March. The accumulation of upbeat figures amid the Brexit calm could trigger an upside move.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD falls to near 0.7100 after slipping below 50-day EMA

AUD/USD depreciates after registering minor gains in the previous day, trading around 0.7120 during the Asian hours. The technical analysis of the daily chart shows the pair consolidating sideways within a rectangle pattern, as neither bulls nor bears gain control. The AUD/USD pair is holding a slight bearish tone however as it sits beneath both the nine-day and 50-day EMAs.

160.00: USD/JPY back near intervention territory after upbeat US jobs report

US Nonfarm Payrolls beat expectations by a wide margin in May, with 172K jobs added. The US Dollar rebounds after the release, helping USD/JPY recover from its intraday lows. Warnings from Japanese authorities continue to limit upside potential near the 160.00 threshold.

Gold targets $4,300 amid stronger Dollar

Gold faces increasing selling interest and navigates the area of three-month lows near the $4,300 mark per troy ounce on Friday. The precious metal’s decline comes as traders assess the stronger-than-expected NFP, while the bid bias in the Greenback and higher US Treasury yields also collaborate with the retracement.

Cardano hits five-year low even as Hoskinson clarifies "break" isn't an exit

Cardano (ADA) price is down 10% at press time on Friday, extending losses over 30% so far this week amid Charles Hoskinson's clarification that "break" isn't an exit.

Week ahead – Fed countdown begins amid US inflation data and geopolitical risks

Fed Chair Warsh’s first meeting approaches as key US inflation data could reshape expectations. Oil prices remain elevated as US-Iran talks continue; tariffs also return to the spotlight. ECB is expected to hike; will it be a one-off move or is July live?

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.