UK CPI preview: What to expect of GBP/USD?

GBP/USD made a solid comeback so far this session, extending its Asian advance beyond 1.21 handle in early Europe. However, the spot appears to have run into resistances located near 1.2140 region, as traders turn cautious and refrain from creating fresh long positions ahead of the UK CPI report, which will be published later this session at 9.30GMT.

However, limited reaction is expected on the data-release, as the main risk event for the pound is expected to be the UK PM May’s speech scheduled around 11.00GMT later today.

UK CPI to accelerate in December

The UK consumer prices are expected to tick higher to 1.4% in December y/y, after having booked a 1.2% reading in November. While core figures, excluding volatile food and fuel costs, are also expected to tick higher to 1.5% in the reported month versus 1.4% previous.

On monthly basis, the consumer prices are also seen higher by 0.3% in Dec versus 0.2% last.

Analysts at TDS see upside for the UK CPI for December, with a headline reading of 1.5% y/y versus market consensus of 1.4%.

Deviation impact on GBP/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 15 and 60 pips in deviations up to 2 to -3, although in some cases, if notable enough, a deviation can fuel movements of up to 75 pips.

GBP/USD Technical Levels

Haresh Menghani, Analyst at FX Street explains, “A follow through buying interest above 1.2100 handle is likely to boost the pair towards 61.8% Fibonacci retracement level resistance near 1.2135 area. On a sustained move 1.2135 resistance, the pair seems all set to aim towards reclaiming 1.2200 handle and head towards testing its next major resistance near 1.2220-30 region.”

“On the flip side, retracement back below 1.2075-70 immediate support seems to drag the pair back towards 23.6% Fibonacci retracement level support near 1.2045 level. Weakness below 1.2045 support now seems to find support near 1.2015-10 region. However, a decisive break below 1.20 psychological mark would confirm near-term bearish bias and drag the pair towards sub-1.1800 support area, marking 61.8% Fibonacci expansion level of 1.3445-1.1980 downslide and subsequent retracement.”