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

Update:  UK inflation remains at 0% – GBP/USD slides

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 an unexpected CPI reading can  have a significant  effect on  the direction of GBP/USD.

Inflation in the UK continues to drop, and  CPI has now softened for four consecutive months. In February, the index dropped to 0.0%, within expectations. No change is expected in the March report, but if CPI slips into negative territory, the pound could take a hit.

Sentiments and levels

GBP/USD plunged last  week, even without stellar US numbers. Will the greenback’s rally continue?  UK inflation is in a nosedive, and the BOE seems in no hurry to raise interest rates, which would boost the pound. US employment data rebounded nicely  last week following  the  dismal NFP report  and market sentiment on the US economy remains strong. So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5008, 1.4813, 1.4621, 1.4521, 1.4346  and 1.4227.

5 Scenarios

  1. Within expectations: -0.3% to +0.3%. 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: +0.4% to +0.8%: A stronger reading than predicted could push the pair above one resistance line.
  3. Well above expectations: Above +0.8%: An unexpectedly sharp rise could push GBP/USD upwards, with a second line of resistance at risk.
  4. Below expectations: -0.8% to -0.4%: A lower than expected reading could pull the pair downwards, with one support level at risk.
  5. Well below expectations: Below -0.8%:  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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