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British  CPI, which  is released each quarter, is an inflation index which measures the change in the price of goods and services charged to consumers. 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 8:30 GMT.

Indicator Background

Analysts consider CPI one of the most important economic indicators, and the release of the  British CPI can affect the direction of GBP/USD.  The  level of  inflation is an important component in  any decision by the BOE to raise interest rates, which would affect the movement of GBP/USD.

CPI   continues to fall and dropped to 1.6% in Q1, matching the estimate.  Little change is expected in Q2, with the estimate standing at 1.7%.

Sentiments and levels

After coming within a whisker of the 1.70 level, the pound has not looked strong against the dollar.  A hike in interest rate levels by the BOE would be bullish for the pound, but the Bank has done its best to dampen speculation about a rate hike.   In the US, key indicators continue to point upwards, and the Fed is likely to continue trimming QE, which is a vote of confidence in the health of the US economy.  Thus, the overall sentiment is bullish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.7375, 1.7180, 1.6990, 1.6823, 1.6705, and 1.66.

 

5 Scenarios

  1. Within expectations: 1.3% to 1.9%. 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: 2.0% to 2.3%: A stronger reading than predicted could push the pair above one resistance line.
  3. Well above expectations: Above 2.3%: An unexpectedly sharp rise could push GBP/USD upwards, with a second line of resistance at risk.
  4. Below expectations: 0.9% to 1.2%: A lower than expected reading could pull the pair downwards, with one support level at risk.
  5. Well below expectations: Below 0.9%:  In this scenario,  the pair could break below a second  support level.

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

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