When are the UK CPIs and how could they affect GBP/USD?

The UK CPIs Overview

The cost of living in the UK as represented by the Consumer Price Index (CPI) for November month is due early on Wednesday at 07:00 GMT. The key inflation data will join the current Brexit drama, the coronavirus (COVID-19) vaccine headlines and the US covid stimulus updates to entertain the GBP/USD traders. The price economics gain more importance ahead of Thursday’s Bank of England meeting.

The headline CPI inflation is expected to ease from 0.7% prior to 0.6% on an annual basis. The Core CPI that excludes volatile food and energy items is also likely to recede from 1.5% to 1.4% YoY. Talking about the monthly figures, the CPI bears the upbeat consensus of +0.1% versus +0.0% prior.

In this regard, analysts at TD Securities said,

For CPI, we look for the headline to slip lower to 0.6% y/y (market forecast 0.6%), and for core CPI to slip to 1.4% y/y (expected 1.4%). Details from the preliminary Eurozone prints showed services prices rebounding a bit, while goods prices were weaker, possibly linked to Black Friday discounting, and we look for a similar pattern in the UK.

Deviation impact on GBP/USD

Readers can find FXStreet's proprietary deviation impact map of the event below. As observed, the initial market reaction is likely to remain confined between 15 and 80 pips in deviations up to 2 to -3. The same suggests the importance of the key inflation data for GBP/USD pair traders.

How could it affect GBP/USD?

By the press time of pre-London open on Wednesday, GBP/USD cheers the broad US dollar weakness, coupled with the hopes of a UK-EU trade deal by this weekend, to make rounds to the mid-1.3400s.

While UK PM Boris Johnson has repeatedly shown the readiness to bear the burden of no-deal Brexit, the European policymakers have recently talked positively about the progress. Though, rumors over Canada-style or Australia-style Brexit deal keep weighing the mood. Also challenging the sentiment could be the market’s cautious sentiment ahead of the final verdict as well as the wait for the US stimulus and Fed decision.

Should today’s UK CPI manage to beat the market consensus on a positive side, the BOE will have a chance to defy the odds of negative rates, which in turn can offer intermediate strength to GBP/USD. However, nearness to the UK PMIs for December and the risk events are likely to term the CPI-led cable moves as a knee-jerk reaction.

Technically, while bearish MACD and failures to cross the December 09 high of 1.3478 indicates extra downside of the GBP/USD prices, a joint of 10-day SMA and a falling trend line from December 04, around 1.3375, will restrict any further weakness.

Key notes

GBP/USD Price Analysis: Snaps two-day uptrend but bulls stay hopeful above 1.3400

GBP/USD Forecast: Brexit chit-chat underpin the pound

GBP/USD pushed beyond 1.3450 after day of Brexit deal speculation

About the UK CPIs

The Consumer Price Index released by the Office for National Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).