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
Mixed
GBP/USD
Mixed
USD/JPY
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
Gold
Mixed
Oil - US Crude
Mixed
Bitcoin
Mixed
More View more
Real Time News
  • China-US trade talks made breakthrough last week with both sides showing a strong will to reach a final deal - Global Times
  • RT @HuXijin_GT: Based on what I know, China-US trade talks made breakthrough last week and the two sides have the strong will to reach a fi…
  • If a #Brexit deal is reached, Sterling will rally further, while in the equity space, the domestically-focused FTSE 250 should outperform the export-focused #FTSE 100. Get your market update from @nickcawley1 here: https://t.co/nfgon4la8s https://t.co/IEBfQ1wYx9
  • Indices Update: As of 13:00, these are your best and worst performers based on the London trading schedule: US 500: -0.13% Wall Street: -0.21% Germany 30: -0.32% France 40: -0.51% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/Kh9F9IPP6d
  • RT @carlquintanilla: Morgan Stanley thinks the next few weeks/months could “resemble what we saw last December, albeit less dramatic given…
  • RT @onlyyoontv: Chatted China’s take on DC trade talks and, @SullyCNBC— as I mentioned, Tencent has started broadcasting @NBA games again!…
  • BoE's Cunliffe says Brexit uncertainty has weighed on investment, adds that even if we get a Brexit transition deal, still do not know what the final trading relationship will be $GBP
  • .@DailyFX has just launched our new Worldwide Commodities Infographic. Be sure to check it out here to track major geopolitical players as well as live market prices -> https://www.dailyfx.com/research/global-commodities https://t.co/gUmzIfJReN
  • RT @TeddyVallee: *CHINA TO STRICTLY PROTECT IP RIGHTS, PREMIER LI SAYS
  • RT @onlyyoontv: When asked about next steps, @stevenmnuchin1 tells @CNBC: 1) deputy level calls this week 2) top negotiators’ (Lighthizer,…
GBPUSD Rebound Vulnerable to Slowing UK Consumer Price Index (CPI)

GBPUSD Rebound Vulnerable to Slowing UK Consumer Price Index (CPI)

2019-09-18 06:00:00
David Song, Currency Strategist
Share:

Trading the News: UK Consumer Price Index (CPI)

Fresh updates to the UK Consumer Price Index (CPI) may rattle the recent rebound in GBPUSD as the headline reading for inflation is expected to narrow to 1.9% from 2.1% per annum in July.

Image of DailyFX economic calendar

At the same time, the core reading for inflation is anticipated to slip to 1.8% from 1.9% during the same period, and signs of slowing price growth may drag on the British Pound as it puts pressure on the Bank of England (BoE) to insulate the UK economy.

In turn, the Monetary Policy Committee (MPC) may adopt a more cautious tone at the next meeting on October 19, and Governor Mark Carney show a greater willingness to switch gears in 2019 as “underlying growth appears to have slowed since 2018 to a rate below potential.”

However, another unexpected pickup in the UK CPI may trigger a bullish reaction in GBPUSD as it encourages the BoE to retain the current policy throughout the remainder of the year.

Impact that the UK CPI report had on GBP/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JUL

2019

08/14/2019 08:30:00 GMT

1.9%

2.1%

+28

-5

July 2019UK Consumer Price Index (CPI)

GBP/USD 5-Minute Chart

Image of gbpusd 5-minute chart

Source: Trading View

The UK Consumer Price Index (CPI) unexpectedly climbed to 2.1% from 2.0% per annum in June, with the core rate of inflation highlighting a similar dynamic as the reading increased to 1.9% from 1.8% during the same period.

A deeper look at the report showed the cost for recreation items increasing 1.1% in July to lead the advance, with prices at restaurants and hotels climbing 0.8%, while prices for clothing and footwear slipped 2.9% after contracting 1.0% the month prior.

The stronger-than-expected CPI print is likely to keep the Bank of England (BoE) on the sidelines as the UK prepares to depart from the European Union (EU), and the central bank appears to be in no rush to alter the forward guidance for monetary policy as Governor Mark Carney and Co. insist that “the monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.

The British Pound edged higher following the CPI report, with GBPUSD climbing to a session high of 1.2100, but the reaction was short lived as the exchange rate closed the day at 1.2053. Learn more with the DailyFX Advanced Guide for Trading the News.

GBP/USD Rate Daily Chart

Image of gbpusd daily chart

Source: Trading View

  • The broader outlook for GBPUSD is no longer constructive as the exchange rate snaps the upward trend from late last year after failing to close above the Fibonacci overlap around 1.3310 (100% expansion) to 1.3370 (78.6% expansion).
  • Nevertheless, the failed attempt to break/close below the Fibonacci overlap around 1.1890 (61.8% expansion) to 1.1950 (78.6% expansion) has pushed GBPUSD out of the bearish trend carried over from May, with the break/close above the former-support zone around 1.2370 (50% expansion) to 1.2440 (50% expansion) to open up the next topside hurdle around 1.2630 (38.2% expansion) to 1.2640 (38.2% expansion).

Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide.

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong.

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

DISCLOSURES

News & Analysis at your fingertips.