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 August month is due early on Wednesday at 06:00 GMT. The key inflation data will pave the way for market forecasts concerning the “Super Thursday” and hence become even more important than the otherwise case. However, the current Brexit drama and the pre-Fed trading lull may dim the charm of the crucial economic releases.

The headline CPI inflation is expected to recede from 1.0% prior to 0.0% on an annual basis. The Core CPI that excludes volatile food and energy items can also follow the suit with market forecasts suggesting 0.6% YoY print versus 1.8% previous readouts. Talking about the monthly figures, the CPI could drop to -0.6% from +0.4%.

In this regard, analysts at TD Securities said,

UK inflation is set to fall sharply in August due to a number of downside forces, including the VAT cut on the hospitality industry in late-July, the discounting from the Eat Out to Help Out scheme, and a failure of clothing/footwear prices to rebound due to the lack of discounting in July. The error bands are especially wide on determining how much of the VAT cut ultimately passed through to consumers, but we estimate that core CPI slipped to 0.4% y/y (market forecast 0.5%), which would be its lowest print since 2001. That should push headline CPI down to about -0.1% y/y (expected 0.0%), just into negative territory.

Deviation impact on GBP/USD

Readers can find FXStreet's proprietary deviation impact map of the event below. As observed, the initial market reaction is likely to remain confined between 15 and 80 pips in deviations up to 2 to -3. The same suggests the importance of the key inflation data for GBP/USD pair traders.

fxsoriginal

How could it affect GBP/USD?

By the press time of pre-London open on Wednesday, GBP/USD stays mildly bid while piercing 1.2900. In doing so, the Cable prints a three-day winning streak while extending pullback from a seven-week low flashed on Friday.

The pair has mainly cheered the US dollar weakness as the DXY fails to keep the previous day’s recovery moves and attacks 93.00 by the press time. Also favoring the GBP/USD buyers are speculations, as conveyed by Reuters, UK Express and Telegraph, concerning the British push to break the Brexit deadlock while easing stance on fisheries. It should also be noted that recently neutral statements from the Bank of England (BOE) policymakers also keep the Cable buyers hopeful ahead of tomorrow’s key monetary policy meeting and Quarterly Inflation Report (QIR). As a result, today’s inflation data becomes the key and hence any surprise positive outcome can strengthen the pair while the actual readings near the expected downbeat figures may print short-term declines of the quote.

Technically, the pair’s sustained trading beyond the 200-day EMA level of 1.2753 enables the bulls to target the 50-day EMA, currently around 1.2965. Though, the August month’s low near 1.2980 and the 1.3000 threshold can question the pair’s further upside.

Key notes

GBP/USD is mixed as a Brexit deal is still on a knife edge ahead of the FOMC and BoE

GBP/USD Price Analysis: Bears lurking at weekly and daily resistances

GBP/USD Forecast: Holding around 1.2900, bullish momentum receding

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).

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD holds gains above 1.1850 amid tepid market mood

EUR/USD is trading above 1.1850, holding onto recent gains The uptrend, however, at risk as coronavirus cases rise across the Eurozone. New lockdown restrictions may force the ECB to adopt a stronger dovish stance. Focus shifts to Powell's speech, EZ Preliminary PMIs. 

EUR/USD News

GBP/USD hovers around 1.2950 amid likely virus curbs

GBP/USD stays well bid near  mid-1.2900s following three successive failures to cross 1.3000 during last week. UK’s health authorities mull lockdown restrictions. Chancellor Sunak may extend business support loans. Fedspeak eyed amid a light calendar. 

GBP/USD News

Gold due for a breakout, according to key indicator

Gold's multi-week consolidation in a narrowing price range could end with a bullish breakout, as a widely-tracked daily chart indicator is about to turn bullish. The yellow metal has carved out a descending triangle pattern over the past four weeks.

Gold News

Forex Today: US dollar sags amid fiscal overhang, mounting coronavirus risks

The US dollar remained on the defensive starting out a fresh week this Monday, extending last week’s softness, courtesy of the gridlock on the US fiscal stimulus.

Read more

WTI buyers attack $41.00 amid US-Iran tension, escalating virus woes

WTI remains heavy below 50-day SMA, drops from $41.18 to begin the week. The energy benchmark keeps trailing 50-day SMA for over two weeks while taking clues from the US-Iran tussle and the coronavirus (COVID-19) headlines. Hopes of further stimulus, China’s optimism favor energy bulls.

Oil News

Forex MAJORS

Cryptocurrencies

Signatures