UK CPI Preview: What to Expect of GBP/USD?
UK cost of living as measured by consumer price index (CPI) and core
consumer price index is due for release today. Economists expect
inflation to have ticked higher in March (0.4% y/y and 0.3% m/m).
Core CPI, which excludes volatile food and energy component, is also seen rising 1.3% y/y compared to February figure of 1.2%.
GBP/USD
had a good day yesterday, rising more than 200 pips to 1.4286 in the NY
session. Profit taking pushed it back to 1.4228 levels in early Europe
before fresh bid wave pushed it higher to 1.4260 levels.
Bulls need better-than-expected CPI data
UK
gilt yields edged higher as markets priced-in an uptick in CPI. The
rise in yields also added to the bid tone around GBP. Thus, GBP bulls
would need a bigger rise in CPI in order to chew through offers around
1.4286-1.43 levels. A combination of better-than-expected headline and
core CPI would be a big boost to GBP bulls.
On the contrary, a
weaker-than-expected headline and core CPI print could see gilt yields
erase previous day’s gains and thus trigger a sell-off in GBP. A rise in
CPI appears to have been priced-in, hence an in line with expectations
figure may not leave the doors open for profit taking.
GBP/USD Technical Levels
The
spot currently trades around 1.4260. Acceptance above 1.4252 (50% of
1.4669-1.3835) + 1.4257 (50-DMA) post CPI release would put sell side
arguments to rest and open doors for a cut through 1.43 and test of
supply around 1.4330 (23.6% of 1.5930-1.3835). On the other hand,
failure to remain above 1.4252 would shift risk in favor of a drop to
1.4213 (rising trend line support). A violation there could signal
intraday bullish invalidation and possibility of a drop to 1.4170
(hourly chart support).
(Market News Provided by FXstreet)
