When is the UK inflation data 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 November month is due early on Wednesday at 07:00 GMT.

Given the recently released mixed employment data, coupled with the firmer economic activity numbers and the doubts over the Bank of England’s (BOE) next moves, today’s British inflation data will be watched closely by the GBP/USD traders. Also increasing importance for today’s inflation numbers is the existence of the BOE’s monetary policy meeting on Thursday.

That said, the headline CPI inflation is expected to retreat from a 41-year high of 11.1% YoY to a 10.9% yearly figure while the Core CPI, which excludes volatile food and energy items, is likely to reprint the 6.5% YoY number. Talking about the monthly figures, the CPI could ease to 0.6% versus 2.0% prior.

Also important to watch is the Retail Price Index (RPI) figures for November, expected to ease to 0.5% MoM and 13.8% YoY versus 2.5% and 14.2% in that order.

In this regard, Westpac 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 sidelined around 1.2350 after refreshing the six-month high the previous day. In doing so, the Cable pair portrays the market’s anxiety ahead of the key monetary policy meetings of the US Federal Reserve and the Bank of England (BOE), as well as challenges to the sentiment emanating from China.

Although the BOE has already delivered its strongest rate hike in 33 years and is expected to retreat on Thursday, strong US inflation data won’t stop the policymakers from the “Old Lady, as the BOE is informally called, in announcing another strong rate lift. Additionally, the last monetary policy meeting updates showed a divide between the hawks and doves and hence firmer UK inflation numbers could help the hawks to announce another 0.75% rate hike even if the markets and doves are pushing for a 50 bps move.

Even so, the existence of the Fed’s monetary policy meeting and the “Super Thursday”, comprising BOE’s details of monetary policy actions, could restrict the UK inflation data’s impact on the GBP/USD prices. As a result, the Cable pair may witness a small run-up in case of a positive surprise from the data while a pullback can’t be ruled out if inflation numbers ease.

Technically, GBP/USD buyers remain hopeful unless the quote offers a daily closing below the August month’s high near 1.2290.

Key notes

GBP/USD corrects to near 1.2350, upside seems favored on hopes of a smaller Fed rate hike

GBP/USD Price Analysis: Test of a 20-EMA on gradual correction narrates a fresh buying opportunity

BoE Interest Rate Decision Preview: Focus on vote split amid high inflation and economic gloom

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 the 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).