GBP/USD: Trading the British CPI

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British CPI, released each month, is the primary gauge of consumer inflation and is keenly anticipated by the markets. A reading which is higher than the market forecast is bullish for the pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Tuesday at 9:30 GMT.

Indicator Background

Analysts consider CPI one of the most important economic indicators and should be treated as a market-mover by traders. An unexpected reading from British CPI can quickly affect the direction of GBP/USD.

CPI continues to head upwards. The index improved to 1.8% in January, shy of the forecast of 1.9%. The upward direction is expected to continue, with an estimate of 2.1%.

Sentiments and levels

The Federal Reserve pushed the rate trigger last week and more moves are expected this year. With the Bank of England maintaining a neutral policy regarding rate movement, monetary divergence continues to favor the greenback. The US economy continues to perform well, so sentiment for the US dollar remains strong. As well, the uncertainty over Brexit negotiations will continue to weigh on the British pound

Technical levels, from top to bottom: 1.2706, 1.2511, 1.2385, 1.2218, 1.2080, and 1.1943

5 Scenarios

  1. Within expectations: 1.7% to 2.5%. In this scenario, GBP/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
  2. Above expectations: 2.6% to 3.0%: A stronger reading than predicted could push the pair above one resistance line.
  3. Well above expectations: Above 3.0%: An unexpectedly strong rise could push GBP/USD upwards, with a second line of resistance at risk.
  4. Below expectations: 2.0% to 2.4%: A lower than expected reading could pull the pair downwards, with one support level at risk.
  5. Well below expectations: Below 2.0%: A sharp decline could see the pair break below a second support level.

For more on the pound, see the GBP/USD forecast.

Get the 5 most predictable currency pairs

About Author

Kenny Fisher – Senior Writer

A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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