UK CPI preview: What to expect of GBP/USD?

GBP/USD found strong bids near 1.2220 over the last hours, now taking on the recovery once again towards 1.2270 levels, with markets expectant of a better UK CPI report, which will be published later this session at 8.30GMT.

UK CPI to accelerate in September

The UK consumer prices are expected to tick higher to 0.8% in September y/y, after having booked 0.6% reading in August. While core figures, excluding volatile food and fuel costs, are also expected to increase 1.4% from 1.3% last.

While on monthly basis, the consumer prices are expected to ease +0.1% in September versus +0.3% seen previously. Focus will remain on the core figures in wake of the GBP weakness post-Brexit vote.

Analysts at TD Securities note, “In fact, the fuel/gasoline component of CPI is likely to come in positive on a Y/Y basis for the first time since August 2013.”

“There are wider question marks than usual though around core inflation, where the post-Brexit exchange rate depreciation points to upside risks, while warmer weather will likely weigh on clothing/footwear prices as we’ve seen in other parts of Europe, keeping core inflation contained for now. We look for core CPI to edge just a tenth higher to 1.4% Y/Y, in line with consensus.”

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 60 pips in deviations up to 2 to -3, although in some cases, if notable enough, a deviation can fuel movements of up to 75 pips.

GBP/USD Technical Levels

Haresh Menghani, Analyst at FXStreet noted, “From current levels, weakness below 1.2200-1.2195 immediate support would reaffirm near-term range-bound price action and drag the pair to lower end support near 1.2130-25 region.”

“On the upside, 1.2265-70 area remains immediate strong hurdle, which if conquered should lift the pair immediately beyond 1.2300 handle towards its next resistance near 1.2375 region marking 50% Fibonacci retracement level of 1.2771-1.1980 recent slide.”


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