When is UK CPI and how could it affect GBP/USD?

UK November CPI overview

The cost of living in the UK as represented by the consumer price index (CPI) is due at 9:30 GMT. The CPI inflation is expected to rise 0.2% m/m in November with the annual increase remaining at 3.0% y/y. The core inflation rate that excludes volatile food and energy items is also expected to remain at the unchanged rate of 2.7% in November.

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 75 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?

According to Viraj Patel, Research Analyst at ING says positive surprises over the coming months – or signs of inflationary persistence – would alter the Bank's growth-inflation trade-off in favor of further tightening. In this scenario, calls for a second rate hike in May-18 could gain traction – and this hawkish front-end re-pricing in the UK curve is what we see as the catalyst to take GBP/$ beyond 1.36 at the turn of the year.”

Meanwhile, a big miss on the inflation would add credence to the bearish GBP/USD technicals and may open doors for a drop to 50-day MA level of 1.3245.

Key Notes

• GBP/USD - Bearish MA cross, US-UK yield spread rises ahead of UK CPI
• UK CPI Preview: Inflation set to derail wages keeping household spending lower

About 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).