GBP/USD: Trading the UK CPI July 2015

British CPI, released each month, is the primary gauge of consumer inflation and is keenly anticipated by the markets. A reading which is higher than the market forecast is bullish for the pound.

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 should be treated as a market-mover by traders. An unexpected reading from British CPI can quickly affect the direction of GBP/USD.

CPI has shown little movement, hovering close to the zero level since January. The index improved to 0.1% in May, matching expectations. An identical reading is expected in the June report.

Sentiments and levels

Worries about Greece were expressed in the Fed minutes. The latest Greek crisis appears to have been resolved, which helps clear the way for a Fed hike in September, and any hints about an imminent hike would be great news for the greenback. The pound will need strong numbers from CPI and Claimant Count Change in order to reverse its current slide against the strong dollar. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5769, 1.5682, 1.5590, 1.5485, 1.5341, and 1.5269.

5 Scenarios

1. Within expectations: -0.2% to +0.1%. In this scenario, GBP/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
2. Above expectations: +0.2% to +0.5%: A stronger reading than predicted could push the pair above one resistance line.
3. Well above expectations: Above +0.5%: An unexpectedly strong rise could push GBP/USD upwards, with a second line of resistance at risk.
4. Below expectations: -0.7% to -0.3%: A lower than expected reading could pull the pair downwards, with one support level at risk.
5. Well below expectations: Below -0.7%: A sharp decline could see the pair break below a second support level.

For more on the pound, see the GBP/USD.

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