GBP/USD: Trading the British CPI Dec 2013

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British CPI, also known as inflation, is a key consumer indicator. It measures the change in the price of goods and services charged to consumers. A reading that 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

CPI is the primary gauge of inflation in the UK. An increase in inflation reflects more economic activity, which is bullish for the pound.

CPI dropped to 2.2% in October, its lowest level in over a year. The markets are not expecting any change in November, with an estimate of a 2.2% gain.

Sentiments and levels

The pound remains strong and continues to hold its own against the US dollar. The British economy continues to pick up steam, which is good news for the pound. For its part, the dollar could get a boost as speculation swirls over a possible QE taper this week. Thus, the overall sentiment is bearish on GBP/USD is neutral towards this release.

Technical levels, from top to bottom: 1.66, 1.6475, 1.6343, 1.6247, 1.6125 and 1.60.

5 Scenarios

  1. Within expectations: 1.9% 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 reading above expectations could push the pair above one line of resistance.
  3. Well above expectations: Above 3.0%: An unexpectedly sharp rise in inflation could push GBP/USD higher, breaking above a second resistance line.
  4. Below expectations: 1.4% to 1.8%: A weak release could push GBP/USD downwards, with one support level at risk.
  5. Well below expectations: Below 1.4%: In this scenario, the pair could break below a second support level.

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

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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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