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

Dhwani Mehta FXStreet

The UK August 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 +0.5% inter-month in August while the annualized figure is seen a touch lower at 1.9%. The core inflation rate that excludes volatile food and energy items is likely to have softened to 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 is seen making a minor recovery attempt from session lows of 1.2463 reached after the European Commission President Juncker said that risk of a no-deal Brexit remains 'real'. A bigger-than-expected decrease in the UK price pressures could accelerate the declines in the pound back towards the 1.24 handle vs. the greenback.

“From a technical perspective, the pair has been showing some resilience below 38.2% Fibo. level of the 1.3178-1.1959, clearly suggesting that the near-term bias remains in favor of bullish traders. Hence, a follow-through buying interest has the potential to lift the pair further 50% Fibo. level resistance near the 1.2560-65 region, above which the momentum could further get extended beyond the 1.2600 round-figure mark, towards testing the next major confluence region near the 1.2700-20 region - comprising of 61.8% Fibo. level and the very important 200-day SMA. On the flip side, any meaningful pullback now seems to attract some fresh buying interest around the 1.2415 region (38.2% Fibo.) and help limit the downside near the 1.2380 horizontal support.,” FXStreet’s Analyst Haresh Menghani notes.

Key Notes

UK: Core CPI likely to slip to 1.7% – TD Securities

GBP Futures: further upside looks limited

Fed meeting amongst market movers today – Danske Bank

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).

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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