British CPI is the primary gauge of consumer inflation in the UK . A reading which is higher than the market forecast is bullish for the pound.
Update: UK CPI falls to 1.6% – GBP/USD extends falls
Here are all the details, and 5 possible outcomes for GBP/USD.
Published on Tuesday at 8:30 GMT.
Indicator Background
Analysts consider CPI one of the most important economic indicators, and the release of the British CPI can affect the direction of GBP/USD. The level of inflation is an important component in any decision by the BOE to raise interest rates, which would be bullish for the pound.
CPI posted a gain of 1.9% last month, close to the 2.0% target of the BOE. This beat the forecast of 1.6%. Little change is expected in the upcoming release, with an estimate of 1.8%.
Sentiments and levels
The markets received a rude surprise from the BOE Inflation Report, with the central bank downgrading its forecast for wage growth. BOE Governor Mark Carney sent a message to the markets that any rate hike would be “slow and small”. Meanwhile, in the US, a rate hike is likely by mid-2015 or earlier, and increasing speculation about a move by the Fed is bullish for the dollar. Thus, the overall sentiment is bearish on GBP/USD towards this release.
Technical levels, from top to bottom: 1.7108, 16989, 1.6823, 1.6669, 1.66 and 1.6466.
5 Scenarios
- Within expectations: 1.6% to 2.0%. In this scenario, GBP/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
- Above expectations: 2.1% to 2.4%: A stronger reading than predicted could push the pair above one resistance line.
- Well above expectations: Above 2.4%: An unexpectedly sharp rise could push GBP/USD upwards, with a second line of resistance at risk.
- Below expectations: 1.2% to 1.5%: A lower than expected reading could pull the pair downwards, with one support level at risk.
- Well below expectations: Below 1.2%: In this scenario, the pair could break below a second support level.
For more on the pound, see the GBP/USD.
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