The UK May CPIs Overview
The cost of living in the UK as represented by the consumer price index (CPI) is due later today at 0830 GMT. The CPI inflation is expected to remain unchanged at 0.4% m/m in May while the annualized figure is seen a tad firmer at 2.5%. The core inflation rate that excludes volatile food and energy items is expected to have steadied at 2.1% last month.
Deviation impact on GBP/USD
Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 15 and 80 pips in deviations up to 2 to -3, although in some cases, if notable enough, a deviation can fuel movements of up to 120 pips.
How could it affect GBP/USD?
According to Haresh Menghani, Analyst at FXStreet, “The bearish bias would be confirmed once the pair breaks through the descending channel support, currently near the 1.3320-15 region. Below the mentioned support, the pair is likely to slide below the 1.3300 handle and head towards testing its next support near the 1.3240 region, closer to YTD lows set on May 29th.”
“On the upside, any meaningful momentum back above the 1.3400 handle might continue to confront some fresh supply near the 1.3430 region, which if cleared decisively might negate the negative outlook and trigger a short-covering rally towards 1.3455-60 intermediate resistance en-route the key 1.3500 psychological mark,” Haresh adds.
The GBP/USD pair is likely to show a limited reaction to the UK inflation figures, as the main market-moving event for today remains the FOMC decision accompanied by the forward guidance.
About the UK CPI
The Consumer Price Index released by the Office for National Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).
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