When is the UK inflation data and how could it affect GBP/USD?
The UK CPIs Overview
The cost of living in the UK as represented by the Consumer Price Index (CPI) for May month is due early on Wednesday at 06:00 GMT.
Given the recently released upbeat UK employment data, coupled with the hawkish concerns about the Bank of England’s (BOE) next moves, today’s British inflation numbers will be the key for the GBP/USD traders. Also increasing the importance of the UK CPI is the looming BoE Interest Rate Decision, on Thursday.
That said, the headline CPI inflation is expected to ease to 8.4% YoY in May, versus 8.7% prior. Further, the Core CPI, which excludes volatile food and energy items, is likely to remain unchanged at 6.8% YoY. Talking about the monthly figures, the CPI could ease to 0.5% versus 1.2% prior.
Also important to watch is the Retail Price Index (RPI) figures for May, expected to mark a reduction to 0.5% MoM and 11.2% YoY versus 1.5% and 11.4% priors in that order.
How could it affect GBP/USD?
GBP/USD stays defensive above 1.2750, mildly bid near 1.2765 by the press time, as it lacks follow-through of the previous two days’ downbeat performance ahead of the key UK inflation data. Even so, the US-China tension and comparatively more hawkish comments from the Fed, than the Bank of England (BoE) officials, join the fears of the UK’s recession to prod the Cable pair buyers.
However, upbeat UK employment numbers and the Bank of England (BoE) policymakers’ push for higher rates keep the hopes of witnessing more Pound Sterling upside alive ahead of the key British inflation data.
That said, considering the recent improvement in the British data and expectations of overcoming the labor problems, the softer UK inflation data may help the GBP/USD bears to retake control. It’s worth noting that a positive surprise from the UK CPI or Core CPI should be traded with a pinch of salt amid hawkish Fed bets.
Technically, the Cable pair recently bounced off the bottom line of the stated rising wedge, which in turn joins the steady RSI (14) to suggest further recovery of the quote. However, the 21-SMA surrounding 1.2435 restricts the immediate upside of the GBP/USD price.
Key notes
GBP/USD retraces below 1.2800 on a strong USD, ahead of Powell testimony, BoE’s decision
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 the 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
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
