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

GBP/USD continues to trade in a tight range below 100-DMA at 1.2700, with the downside capped amid renewed weakness seen around the greenback versus its main competitors,  while investors refrain from creating fresh long positions ahead of the UK CPI report, which will be published later this session at 9.30GMT.

UK CPI to tick higher in October

The UK consumer prices are expected to tick higher to 1.1% in November y/y, after having booked 0.9% reading in October. While core figures, excluding volatile food and fuel costs, are also expected to tick higher to 1.3% in the reported month versus 1.2% previous.

On monthly basis, the consumer prices are also expected to increase slightly by 0.2% in Nov versus 0.1% last.

Analysts at BBH noted, ““UK price pressures are rising.  The past decline in sterling the rise in commodity prices are evident.  Headline CPI is expected to rise 0.2% in November.  In November 2015, prices were flat.  This means that the due to the base effect, the year-over-year rate is expected to rise to 1.1% from 0.9%.   If that pans out, UK headline CPI will be at its highest level since late October 2014. “

“The core rate pulled back to 1.2% in October from 1.5% in September.  It is expected to tick up to 1.3% in November, which is what it has averaged this year. However, to the extent that producer prices reflect pipeline pressures, UK consumer inflation is likely to rise further in the coming months.” 

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

At 1.2675, the spot finds next support at 1.2548 (Dec 9 low), a break below which would expose 1.2457 (55-DMA) and then 1.2297 (Nov 18 low. On the flip side, the next hurdle is seen at 1.2700 (100-DMA), beyond which 1.2747 (Dec 2 high) and 1.2776 (Dec 6 high) lie.