The UK January 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 arrive at -0.7% inter-month in January while the annualized figure is seen ticking a tad lower to 1.9%. The core inflation rate that excludes volatile food and energy items is seen steadying at 1.9% 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?
On an upside surprise, the GBP bulls could receive a fresh boost that could help the rates test the key resistance at 1.2945/48 (200-DMA, 10-DMA), above which the next upside targets lie at 1.2999/1.3000 (daily R3/ psychological levels) and 1.3056 (Feb 5 high).
On a bigger-than-expected drop in the figures, the GBP/USD pair could stall its recovery mode and fall back to the daily pivot at 1.2878 below which floors open up for a test of 1.2859/43 (50 and 100-DMA) and 1.2833 (3-week lows).
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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