When are the UK CPIs and how could they affect GBP/USD?


The UK July CPIs Overview

The cost of living in the UK as represented by the consumer price index (CPI) is due later on Wednesday at 0830 GMT.

The headline CPI inflation is expected to arrive at -0.1% inter-month in July while the annualized figure is seen lower at 1.9%. The core inflation rate that excludes volatile food and energy items is likely to have steadied at 1.8% 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?

At the press time, GBP/USD looks to extend the bounce from the Asian session lows of 1.2046 as the bulls fight for control near 1.2060 region. A bigger-than-expected decrease in the UK price pressures could knock-off the pound back towards the multi-month lows of 1.2016 vs. the greenback.

“From a technical perspective, Although prices remain below 23.6% Fibonacci retracement of latest declines, GBP/USD holds firm above two-day-old support-line as it trades near 1.2055 ahead of the UK CPI release. Also supporting the odds of upside is 12-bar moving average convergence and divergence (MACD) that is slowly inching closer to positive territory. In doing so, the quote can run-up beyond 23.6% Fibonacci retracement level of 1.2061 while targeting near-term descending trend-line, at 1.2080. Should there be increased rise above 1.2080, Monday’s high around 1.2107 and 61.8% Fibonacci retracement of 1.2136 can become buyers’ favorites. If at all sellers take over, 1.2015 and 1.2000 can be their aims prior to looking at the 2017 low near 1.1987 and 2016 bottom near 1.1800,” FXStreet’s Anil Panchal notes.

Key Notes

UK: Core CPI to hold steady at 1.7% y/y in July - TDS

Forex Today: Trade reprieve provides relief, German recession fears grow, UK inflation eyed

GBP Futures: further decline appears likely

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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