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

GBP/USD stalled its upside attempt  and now reverts towards 1.3300, largely on profit-taking heading into the much-awaited UK inflation report, which will be published later this session at 8.30GMT.

UK CPI to edge higher in August

The UK consumer prices are expected to tick higher to 0.7% in August y/y, after having booked 0.6% reading in July. While core figures, excluding volatile food and fuel costs, are also expected to increase to 1.4% from 1.3% last.

The data from the UK is likely to grab a lot of eyeballs as we head towards the BOE interest rate decision due to be announced on Thursday.

Analysts at TD Securities note, “We expect headline inflation to hold steady at 0.6% y/y (consensus: 0.7%, BoE: 0.8%) in particular as competition in the supermarket sector remains strong, while core jumps a little from July’s 1.3% to 1.5% y/y in August (consensus: 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 20 and 50 pips in deviations up to 2 to -1, although in some cases, if notable enough, a deviation can fuel movements of up to 70 pips.

GBP/USD Technical Levels

Ipek Ozkardeskaya, Market Analyst at London Capital Group explained, “A positive surprise should underpin the short-term recovery toward 1.3445/1.3500, while a negative surprise is expected to encourage a pullback to 1.3296 (major 38.2% retrace on Aug 29th – Sep 2nd advance), 1.3205 (major 61.8%) and 1.3150 (minor 76.4%).”