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

GBP/USD moved-off lows, although remains in the red below 1.25 handle, despite an anticipation of better UK CPI report, which will be published later this session at 8.30GMT. While BOE inflation report hearing will also grab a lot of eye balls, especially Governor Carney’s testimony.

UK CPI to tick higher in October

The UK consumer prices are expected to tick higher to 1.1% in October y/y, after having booked 1.0% reading in September. While core figures, excluding volatile food and fuel costs, are expected to show no growth last month, remaining unchanged at 1.5%.

On monthly basis, the consumer prices are also expected to increase slightly by +0.3% in Oct versus +0.2% seen previously.

Analysts at TD Securities noted, “Markets may be a bit more sensitive to surprises in UK inflation, given the heightened concern that the BoE expressed in the November IR. We look for CPI to accelerate to 1.2% Y/Y in Oct, recording its first ‘one-handle’ in two years, with stronger price pressures from core goods, food, and fuel. This is a touch higher than both consensus and the BoE’s 1.1% forecast from the Nov IR.”

“Also today, we have the BoE’s Carney, Shafik, and Saunders testifying at the Treasury Committee hearing on the November IR at 10am GMT.”

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, “Having faced rejection at 50-day SMA resistance, the pair turned back below 38.2% Fibonacci retracement level of 1.3445-1.1980 downslide. Hence, weakness below Monday’s low support near 1.2440 level is likely to drag the pair below 1.2400 round figure mark support, towards last week lows support near 1.2350 region also nearing 23.6% Fibonacci retracement level”

"On the upside, 1.2540-50 region (38.2% Fibonacci retracement level) remains immediate resistance to clear above which the pair is likely to make a fresh attempt towards retesting 50-day SMA hurdle, currently near 1.2635-40 region.”