The UK CPIs Overview

The cost of living in the UK, as represented by the Consumer Price Index (CPI) for October, is due early on Wednesday at 07:00 GMT.

Given the recently released unimpressive jobless benefits claims and sky-rocketing uncertainty ahead of the Autumn Statement first under the leadership of UK Prime Minister Rishi Sunak, today’s data will be watched closely by the GBPUSD traders.

The headline CPI inflation is expected to refresh a 30-year high with a 10.7% YoY figure versus 10.1% released for September while the Core CPI, which excludes volatile food and energy items, is likely to drop marginally to 6.4% YoY during October, from 6.5% previous readouts. Regarding the monthly figures, the CPI is expected to escalate vigorously to 1.7% against 0.5% reported earlier.

It’s worth noting that a gradual rise in wage prices and a downbeat 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 is seen as stable at 14% on a non-seasonally adjusted basis whereas the monthly prints could shift higher to 1.3% versus 0.7% the prior release. Furthermore, the Retail Price Index (RPI) is also on the table for release, which is expected to rise to 13.5% YoY from 12.6% prior while the MoM prints could jump to 1.8% from 0.7% in previous readings.

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 30-40 pips.

How could it affect GBP/USD?

Recent glory to the risk-on profile has been keeping the Cable in the grip of bulls but Russia-Poland noise after the expected launch of two stray missiles from Russia has trimmed risk appetite. Domestically, Pound bulls could be punished for revealing a 3.6k jump in jobless benefits numbers against an expectation of a negative figure.

What’s been good in the payroll data was an improvement in Average Earnings. The Average Earnings landed higher at 5.7% than the consensus of 5.6%. Households in the UK region are already facing turbulence of decline in real income due to escalating inflationary pressures. An improvement in earnings data may support them to offset inflation-adjusted payouts.

Apart from the UK CPI, an event that has kept investors on the edge is the Autumn Statement prepared by UK PM Rishi Sunak and Chancellor Jeremy Hunt, which will dismantle Liz Truss’s mini-budget and put forward a strategic plan to wipe out the fiscal hole.

For Autumn Budget, investors will focus on the bifurcation of tax hikes and spending cuts to meet the GBP 60bln fiscal hole. Treasury sources told Sky News the financial "black hole" could be as large as £60bn - which may require up to £35bn of spending cuts and an extra £25bn to be raised through taxation. Apart from that, the upper cap for energy bills will be of significant importance.

Technically, the cable is displaying a balanced auction profile in a range of 1.1832-1.1888 as a position build-up post the release of the UK inflation figures and the Autumn Budget will be more informed. The 200-period Exponential Moving Average (EMA) at 1.1815 is advancing, which indicates that the secular trend is bullish. Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates a rangebound structure amid an absence of a potential trigger.

Keynotes

GBPUSD struggles to regain 1.1900 ahead of UK inflation, US Retail Sales

GBPUSD aims to recapture 1.2000 amid upbeat market mood, UK Inflation eyed

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).