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

The UK CPIs Overview

The cost of living in the UK as represented by the Consumer Price Index (CPI) for April month is due early on Wednesday at 06:00 GMT. The inflation numbers will be the key for GBP/USD pair traders considering the survey period that includes the virus-led lockdown.

The headline CPI inflation is expected to arrive at 0.9% on an annual basis, softer than the previous +1.5%. The Core CPI that excludes volatile food and energy items is likely to have risen by 1.5% YoY last month compared to the previous rise of 1.6%.

In this regard, analysts at TD Securities said, “We see some upside risk to the April inflation data, looking for core CPI to edge just slightly lower to 1.5% y/y (market 1.3%), and headline CPI to fall further to 1.0% y/y.”

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?

By the press time of pre-London open on Wednesday, GBP/USD rises to 1.2267, up 0.10% on a day, while printing a three-day winning streak. Despite the broad US dollar weakness favoring the pair, investors remain cautious ahead of the UK CPI data release as the lockdown period has been disappointing for Britain. As a result, below-forecast UK price pressures data can weigh on the pair’s recent recovery. However, any surprises following the footsteps of the Unemployment rate might not hesitate to break 50-day SMA for one more time.

FXStreet’s Yohay Elam expects the British currency’s fall if the inflation data falls closer to zero figure:

UK inflation figures for April are set to show a considerable deceleration to just below 1%. The closer it falls to zero, the greater the chances of the BOE slashing rates below 0%, and the greater the potential slide for the pound.

Key notes

GBP/USD Price Analysis: Struggles between 50-day SMA, monthly resistance-turned-support

UK Inflation Preview: Falling and taking rates below zero on its way? Sterling may suffer

About the UK CPIs

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).