The UK December CPIs Overview
The cost of living in the UK as represented by the consumer price index (CPI) is due later on Wednesday at 0930 GMT. The headline CPI inflation is expected to steady at 0.2% inter-month in December while the annualized figure is seen ticking a tad lower to 2.1%. The core inflation rate that excludes volatile food and energy items is expected to have remained unchanged at 1.8% last month.
Just ahead of the UK CPI report release, the BOE Governor Mark Carney is scheduled to testify, along with three Financial Policy Committee members, on the Financial Stability Report (FSR) before the Treasury Select Committee (TSC), in London at 0915 GMT. Markets will watch out for any hints on the monetary policy path, in light of the crushing Brexit vote defeat.
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?
Upbeat UK CPI figures could offer a fresh lift to the GBP bulls, that could help the rates retest 1.2890/1.2900 (post-Brexit vote high/ round number), above which the next upside targets lie at 1.2931 (Jan 14 high) and 1.2982 (2000-DMA).
On a negative surprise, the GBP/USD pair could fall back to the daily pivot at 1.2820 below which floors open up for a test of 1.2807 (10-DMA) and 1.2750 (psychological levels).
Key Notes
Market themes of the Day: German and UK inflation headlines day after Brexit deal historic failure
GBP futures: further consolidation on the cards
GBP/USD Forecast: Investors look past May’s Brexit vote defeat, Carney's testimony/UK CPI eyed
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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