When are the UK CPIs and how could they affect GBP/USD?

The UK CPIs Overview

The cost of living in the UK as represented by the Consumer Price Index (CPI) for December month is due early on Wednesday at 07:00 GMT. Given the recently strong employment data, coupled with the cautious optimism at the Bank of England (BOE), today’s inflation numbers will be watched closely by the GBP/USD traders.

It’s worth noting that BOE Governor Andrew Bailey is also up for a speech following the inflation data release and hence adds extra importance to the scheduled economics.

The headline CPI inflation is expected to rise to 5.2% YoY versus 5.1% prior while the Core CPI, which excludes volatile food and energy items, is likely to ease to 3.9% from 4.0% in December. Talking about the monthly figures, the CPI could ease to 0.3% MoM from 0.7% marked in November.

It’s worth noting that the supply crunch also highlights the Producer Price Index (PPI) as an important catalyst for the immediate GBP/USD direction. That being said, the PPI Core Output YoY may jump from 7.9% to 8.6% on a non-seasonally adjusted basis whereas the monthly prints may remain unchanged at 0.8%. Furthermore, the Retail Price Index (RPI) is also on the table for release, expected to remain intact as 7.1% YoY and 0.7% MoM.

In this regard, analysts at TD Securities said,

How could it affect GBP/USD?

GBP/USD snaps four-day declines to bounce off the weekly low, picking up bids to 1.3600 ahead of Wednesday’s London open. In doing so, the cable pair cheers the US dollar pullback amid mixed concerns over the Fed’s next move and uncertainty over the US stimulus.

Political angst and Brexit woes joined increasing odds of the Fed’s faster rate hike, not to forget Omicron woes in the UK, to weigh on the GBP/USD prices in the last one week. However, the BOE hawks stay on the table and hence today’s inflation data will be crucial to follow.

In this regard, FXStreet’s Yohay Elam says

Key notes

GBP/USD is firming in Asia despite UK political angst

UK Inflation Preview: Hot inflation to send sterling surging, as BOE could go beyond rate hike

About the UK CPIs

The Consumer Price Index released by the Office for National Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).