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 June month is due early on Wednesday at 06:00 GMT. Considering the pair’s recent upward trajectory, in contrast to the increasing odds of BOE’s rate cut, the inflation numbers will be the key for GBP/USD pair.

The headline CPI inflation is expected to arrive at 0.4% on an annual basis, softer than the previous 0.5%. The Core CPI that excludes volatile food and energy items is likely to remain unchanged at 1.2% on a YoY basis.

In this regard, analysts at TD Securities said,

We look for inflation to dip a bit lower in June, with core CPI falling to 1.1% y/y (expected 1.2%), and headline CPI to 0.4% y/y (forecast 0.5%). As the UK economy began opening up in June, we believe that retailers likely provided deeper discounts than normal in order to clear their old stock, and to lure consumers back to the shops. They may also need to continue providing deeper discounts in order to compete with online retailers, as so much of consumer purchasing has shifted online now. External MPC member Silvana Tenreyro delivers a speech on COVID-19 and the economy at 9 am BST.

Deviation impact on GBP/USD

Readers can find FXStreet'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 eases from intraday top of 1.2587 to 1.2567, up 0.12% on a day, while defying the previous two-day losing streak. The pair’s recent gains could be attributed to the increasing hopes of further stimulus from the UK government as well as broad US dollar weakness. However, the latest risk-on mood, amid expectations of nearness to the coronavirus (COVID-19) vaccine, compress the pair’s upside. It should also be noted that the chatter concerning the BOE’s negative rates has been gaining momentum off-late.

As a result, below-forecast UK price pressures data can weigh on the pair’s recent recovery. However, any surprises following mixed UK GDP figures might not hesitate to probe the monthly top near 1.2670 ahead of challenging the June month top close to 1.2813.

Key notes

GBP/USD Forecast: UK data hits the Pound

GBP/USD Price Analysis: Bulls breaking up through critical 4HR structure, blue skies on horizon

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).