Rising Threat of Above-Target U.K. CPI to Foster GBP/USD Rebound

U.K. Consumer Price Index (CPI) to Rebound in July.

Core Rate of Inflation to Expand Annualized 2.5%- Second Highest Reading for 2017.

Sign Up Join DailyFX Market Analyst Nicholas Cawley LIVE to Cover a U.K. CPI Report.

Trading a News: U.K. Consumer Price Index (CPI)


A pickup in both a title and core U.K. Consumer Price Index (CPI) might encourage a near-term miscarry in GBP/USD as it puts vigour on a Bank of England (BoE) to normalize financial process progressing rather than later.

In response, a flourishing array of BoE officials might change their position during a subsequent assembly on Sep 14 as ‘the withdrawal of partial of a impulse that a Committee had injected in Aug final year would assistance to assuage a acceleration mistake while withdrawal financial process really supportive.’ However, another gloomy growth might continue to beget a 7 to 2 apart as Sir David Ramsden joins a Monetary Policy Committee (MPC), and a British Pound might face a some-more bearish predestine over a near-term as a infancy stays in no rush to lift a benchmark seductiveness rate off of a record-low.

Impact that the U.K. CPI report has had on GBP/USD during a previous release

June 2017 U.K. Consumer Price Index (CPI)

GBP/USD 5-Minute Chart


The U.K. Consumer Price Index (CPI) suddenly narrowed to an annualized 2.6% in June, with a core rate of acceleration highlighting a identical behavior, with a reading slipping to 2.4% per annum from 2.6% in May. A deeper demeanour during a news showed a debility was led by a 1.0% decrease in prices for wardrobe footwear, with a cost for food non-alcoholic beverages squeezing 0.2% in June, while domicile costs hold prosaic during a same duration after rising 0.6% in May. The British Pound mislaid belligerent following a array of gloomy prints, with GBP/USD pulling subsequent a 1.13050 segment to finish a day during 1.3039.

How To Trade This Event Risk(Video)

Bullish GBP Trade: Headline Core CPI Picks Up in July

  • Need a green, five-minute candle following a CPI news to cruise a prolonged GBP/USD trade.
  • If marketplace greeting favors a bullish British Pound trade, buy GBP/USD with dual apart lots.
  • Set stop during a near-by pitch low/reasonable stretch from entry; demeanour for during slightest 1:1 risk-to-reward.
  • Move stop to breakeven on remaining position once initial aim is met, set reasonable limit.

Bearish GBP Trade: U.K. Inflation Report Continues to Disappoint

  • Need a red, five-minute GBP/USD candle to preference a brief British Pound trade.
  • Carry out a same setup as a bullish Sterling trade, only in reverse.

Potential Price Targets For The Release

GBP/USD Daily Chart

GBP/USD Daily Chart

Chart – Created Using Trading View

  • GBP/USD stands during risk of fluctuating a decrease from a monthly-high (1.3268) as a Relative Strength Index (RSI) fails to safety a ceiling trend from May; might see cost vaunt a identical function if pound-dollar breaks a bullish formations carried over from progressing this year.
  • Break/close subsequent 1.2950 (23.6% retracement) opens adult a subsequent downside jump around 1.2860 (61.8% retracement), that sits above a July-low (1.2812), followed by a 1.2800 hoop (50% expansion).
  • Interim Resistance: 1.3460 (50% retracement) to 1.3481 (July 2016-high)
  • Interim Support: 1.2630 (38.2% expansion) to 1.2680 (50% retracement)

GBP/USD Retail Sentiment

GBP/USD Retail Sentiment

Track Retail Sentiment in Real-Time with a New Gauge Developed by DailyFX

Retail merchant information shows 49.3% of traders are net-long GBP/USD with a ratio of traders brief to prolonged during 1.03 to 1. In fact, traders have remained net-short given June 23 when GBP/USD traded nearby 1.27524; cost has changed 1.7% aloft given then. The array of traders net-long is 12.2% aloft than yesterday and 9.3% aloft from final week, while a array of traders net-short is 0.6% aloft than yesterday and 23.3% reduce from final week.

— Written by David Song, Currency Analyst

To hit David, e-mail dsong@dailyfx.com. Follow me on Twitter during @DavidJSong.

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