When is the UK inflation and how could it affect GBP/USD?

The UK CPIs Overview

The cost of living in the UK as represented by the Consumer Price Index (CPI) for April month is due early on Wednesday at 06:00 GMT. Given the recently strong employment data, coupled with the increased odds of the Bank of England’s (BOE) faster/heavier rate hike trajectory, today’s data will be watched closely by the GBP/USD traders.

The headline CPI inflation is expected to refresh a 30-year high with a 9.1% YoY figure versus 7.0% prior while the Core CPI, which excludes volatile food and energy items, is likely to rise to 6.2% YoY during the stated month, from 5.7% previous readouts. Talking about the monthly figures, the CPI could increase to 2.6% versus 1.1% prior.

It’s worth noting that the recent pressure on wage prices and upbeat jobs report also highlight the Producer Price Index (PPI) as an important catalyst for the immediate GBP/USD direction. That being said, the PPI Core Output YoY may rise from 12.0% to 12.7% on a non-seasonally adjusted basis whereas the monthly prints may ease to 1.6% versus 2.0% prior. Furthermore, the Retail Price Index (RPI) is also on the table for release, expected to rise to 11.1% YoY from 9.0% prior while the MoM prints could inflate to 3.4% from 1.0% in previous readings.

In this regard, FXStreet’s Yohay Elam said,

Deviation impact on GBP/USD

Readers can find FXStreet's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined around 20-pips in deviations up to + or -2, although in some cases, if notable enough, a deviation can fuel movements over 60-70 pips.

How could it affect GBP/USD?

GBP/USD remains pressured around the intraday low near 1.2470, snapping a three-day rebound from a two-year high, ahead of the key UK inflation data. The cable pair’s latest weakness could be linked to the US dollar’s rebound amid a risk-off mood and the hawkish Fedspeak. However, increasing odds of the Bank of England’s (BOE) faster/heavier rate hikes challenge the quote’s downside momentum.

That said, upbeat inflation data, which is more likely, can help the GBP/USD extend the latest advances for the time being. However, Treasury bond yields and GILTS are also likely to play an important role in determining short-term cable moves, which in turn suggests a pullback towards the recently flashed multi-month low.

Technically, the 20-DMA level near 1.2500 tests the GBP/USD buyers but a clear break of the one-month-old descending trend line, around 1.2250 at the latest, join the firmer RSI line to underpin bullish bias. Additionally, two-week-old horizontal support around 1.2400 could restrict the short-term pullback.

Key notes

UK CPI Preview: Inflation “apocalypse” priced in, GBP/USD has room to fall 

GBP/USD Price Analysis: 20-DMA probes bulls near 1.2500 ahead of UK inflation

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).