UK CPI May - Be Ready for GBP/USD

OVERVIEW

According to the UK Office for National Statistcs, CPI annual inflation – the Government’s target measure – was 4.5 per cent in April, up from 4.0 per cent in March. The last time CPI annual inflation was higher was September 2008 when it stood at 5.2 per cent (the record high for CPI).

The largest upward pressures to the change in CPI inflation came from transport, alcoholic beverages, tobacco and household services. Partially offsetting these upward effects was downward pressure from petrol and diesel where prices rose by less than a year ago.

BOE’s Weale crossed the wires on Monday, warning again that “delaying UK rates hikes creates significant risks, with substantial risks CPI could exceed 5% this year”. Market fears are that in the midst of a faltering recovery, BOE will probably stick to its guns and not hike rates even if CPI reaches 5.0%





View data in the calendar

HISTORICAL GRAPH

HOTTEST TRADE

GBP/USD printed a major rebound on Monday, moving away from lows near 1.6200 to rally past 1.6400, a break that was achieved through the latest Asian session. From a technical standpoint, “Hourly chart is quite bullish, with momentum heading back north and price developing above moving averages, while bigger time frames support the bias,” explains Valeria Bednarik, Chief Analyst at FXstreet.com.

POSSIBLE GBP/USD REACTION

Minimum positive deviation of 0.3% : If the number out is 4.8% or higher, GBP/USD is likely to get a boost. “If we can maintain strength and break through 1.6430 we are looking at this coming higher with 1.6485 to 1.6520 the short term objective” said Carol Harmer, Founder at CharmerCharts.

Minimum negative deviation of 0.3% : If the Inflation number decreases to 4.2% or less, GBP/USD could see strong downside pressure. “We may pullback towards good support at 1.6330. ext level of support is 1.6285. If we do lose this support we look back to 1.6216 as your targeted area” Carol explained.

Between 4.3% and 4.7% : Expect range between 1.6430 on the upside, while the downside could be limited by 1.6330.

CHART GBP/USD - CHARMER CHARTS