We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
USD/JPY
Mixed
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Bullish
More View more
Real Time News
  • $AUD Australian Dollar preview ahead of employment data due at the bottom of the hour ⬇️ https://t.co/olQgprLfxK
  • UK Labour Party’s Jeremy Corbyn is readying to back second referendum on possible new Brexit deal. – The Times #brexit
  • Heads Up:🇪🇺 (EUR) European Summit in Brussels (Day 1) due at 00:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2019-10-17
  • LIVE IN 30 MIN: Join DailyFX Currency Analyst @ZabelinDimitri for the live coverage of Australian Employment data. #AUD
  • (Asia Pacific AM Briefing) US Dollar Uptrend at Risk, Japanese Yen May Gain as Stocks Sink #USD #Yen #Dollar - https://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/asia_am_briefing/2019/10/16/US-Dollar-Uptrend-at-Risk-Japanese-Yen-May-Gain-as-Stocks-Sink.html?CHID=9&QPID=917702 https://t.co/Fz9uCmqnQx
  • The Swedish #Krona and Norwegian #Krone will be in for a tense week ahead of #Brexit-related drama and a crucial EU summit which could be a turning point for the EU-UK divorce. Get your market update from @ZabelinDimitri :https://t.co/zjTNQmDHTt https://t.co/Nf4v2aYoB5
  • Bank of England’s Governor Mark Carney: the general posture of the Brexit talks has been encouraging. - BBG #GBP #BOE
  • RBA’s Deputy Governor Guy Debelle states that the growth in housing demand to see an increase in price response. -BBG #RBA #AUD
  • Bank of England Governor Mark Carney mentions that they are very close to a global liquidity trap and that the Fed's Chair Jerome Powell would never bow to political pressure. -BBG #GBP #BOE #FED
  • Reserve Bank of Australia Deputy Governor Guy Debelle: much of Australian construction downturn is still to be expected and, that the RBA sees 7% decline in dwelling investments in the next year. -BBG #RBA #AUD
Rising UK CPI to Renew GBP/USD Relief Rally as BoE Drops Dovish Tone

Rising UK CPI to Renew GBP/USD Relief Rally as BoE Drops Dovish Tone

2016-11-15 04:00:00
David Song, Currency Strategist
Share:

- U.K. Consumer Price Index (CPI) to Increase Annualized 1.1%- Highest Reading Since October 2014.

- Core Rate of Inflation to Slow from Annualized 1.5% (Fastest Rate of Growth for 2016).

For more updates, sign up for David's e-mail distribution list.

Trading the News: U.K. Consumer Price Index (CPI)

Another pickup in the U.K. Consumer Price Index (CPI) may boost the appeal of the British Pound and fuel a larger relief rally in GBP/USD as the Bank of England (BoE) drops its dovish outlook for monetary policy and becomes increasingly concerned about overshooting the 2% target for inflation.

What’s Expected:

DailyFX Calendar

Click Here for the DailyFX Calendar

Why Is This Event Important:

Heightening price pressures may keep the BoE on the sidelines for the foreseeable future as the central bank now warns ‘monetary policy can respond, in either direction,’ and Governor Mark Carney and Co. may largely endorse a wait-and-see approach for 2017 as officials argue ‘there are limits to the extent to which above-target inflation can be tolerated.’ However, a marked slowdown in the core CPI may undermine the recent recovery in GBP/USD as the fundamental outlook for the U.K. remains clouded with high uncertainty, and the BoE may have little choice but to further insulate the real economy as the new government under Prime Minister Theresa May remain on course to depart from the European Union (EU).

Expectations: Bullish Argument/Scenario

Release

Expected

Actual

Gross Domestic Product (YoY) (3Q A)

2.1%

2.3%

Employment Change (3Mo3M) (SEP)

76K

106K

Average Weekly Earnings ex. Bonus (3MoY) (AUG)

2.1%

2.3%

The ongoing improvement in the labor market accompanied by signs of a stronger-than-expected growth may encourage U.K. firms to boost consumer prices, and another uptick in the headline reading for inflation may spark a bullish reaction in the sterling as market participants scale back bets for additional monetary support.

Risk: Bearish Argument/Scenario

Release

Expected

Actual

Net Consumer Credit (SEP)

1.5B

1.4B

GfK Consumer Confidence (OCT)

-3

-3

Retail Sales ex. Auto Fuel (MoM) (SEP)

0.2%

0.0%

However, weak consumption paired with the slowdown in private-sector lending may drag on price growth, and a dismal development may undermine the near-term rebound in the pound-dollar as it provides the BoE’s with greater scope to further embark on its easing-cycle.

How To Trade This Event Risk(Video)

Bullish GBP Trade: Headline & Core Inflation Beat Market Expectations

  • Need green, five-minute candle following the print to consider a long GBP/USD position.
  • If market reaction favors a long sterling position, buy GBP/USD with two separate position.
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit.

Bearish GBP Trade: U.K. Consumer Price Report Disappoints

  • Need red, five-minute candle to favor a short GBP/USD trade.
  • Implement same setup as the bullish British Pound trade, just in the opposite.

Potential Price Targets For The Release

GBP/USD Daily

GBP/USD Daily Chart

Chart - Created Using Trading View

  • GBP/USD stands at risk for a larger relief rally following the string of failed attempts to close below the 1.2100 (61.8% expansion) handle, with the pair breaking out of the downward trend carried over from September, but the broader outlook remains tilted to the downside especially as the Relative Strength Index (RSI) appears to be turning around ahead of trendline resistance; first topside hurdle comes in around 1.2630 (38.2% expansion) to 1.2680 (50% retracement) followed by 1.2860 (61.8% retracement).
  • Interim Resistance: 1.2920 (100% expansion) to 1.2950 (23.6% expansion)
  • Interim Support: 1.1905 (2016-low) and 1.2100 (61.8% expansion)

Impact that the U.K. Consumer Price Index (CPI) has had on GBP during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

SEP

2016

10/18/2016 08:30 GMT

0.9%

1.0%

-16

+42

September 2016 U.K. Consumer Price Index (CPI)

GBP/USD 5-Minute

GBP/USD Chart

The U.K. Consumer Price Index (CPI) advanced an annualized 1.0% in September after expanding 0.6% the month prior, while the core rate of inflation climbed 1.5% per annum amid forecasts for a 1.4% print. A deeper look at the report showed a 5.9% rise in the cost of education paired with a 1.0% rise in prices for clothing & footwear, while transportation costs also climbed 1.2% during the same period following a 1.0% rise in August. The British Pound regained its footing following the mixed market reaction, with GBP/USD bouncing back from 1.2229 to end the day at 1.2292.

Get our top trading opportunities of 2016 HERE

Read More:

US Dollar Whiplash Ends with a Trump Bump

GBP/JPY Technical Analysis: New Trend in Play after 800-Pip, 3-Day Romp

USD/CAD Technical Analysis: Pending Trade Talks & U.S. Inflation Weakens CAD

S&P 500 - Bears Got Trumpled, Short-term Trading Levels Noted

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.