- U.K. Consumer Price Index (CPI) to Narrow for Six Consecutive Month.
- Core Inflation Unexpectedly Held Steady at 1.7% in February.
Trading the News: U.K. Consumer Price Index
Slowing inflation in the U.K. may spur a larger correction in the GBP/USD as it allows the Bank of England (BoE) to retain its highly accommodative policy stance for an extended period of time.
What’s Expected:
Why Is This Event Important:
The BoE may further delay its exit strategy in an effort to address the ongoing slack in the U.K. economy, but Governor Mark Carney may show a greater willingness to normalize monetary policy sooner rather than later as the central bank anticipates a stronger recovery in 2014.
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Expectations: Bearish Argument/Scenario
| Release | Expected | Actual |
| Net Consumer Credit (FEB) | 0.7B | 0.6B |
| BRC Shop Price Index (YoY) (MAR) | -1.5% | -1.7% |
| Producer Price Index- Output n.s.a. (YoY) (FEB) | 0.7% | 0.5% |
Easing input prices paired with the slowdown in private sector credit may prompt businesses to offer discounted prices to U.K. households, and a weaker-than-expected inflation print may generate a larger pullback in the GBP/USD as it raises the BoE’s scope to retain its highly accommodative policy stance for an extended period of time.
Risk: Bullish Argument/Scenario
| Release | Expected | Actual |
| GfK Consumer Confidence (MAR) | -6 | -5 |
| Retail Sales ex Auto (MoM) (FEB) | 0.1% | 1.8% |
| Average Weekly Earnings ex Bonus (3MoY) (JAN) | 1.2% | 1.3% |
Nevertheless, the resilience in household consumption along with the pickup in wage may encourage U.K. firms to raise consumer prices, and a stronger-than-expected CPI print may heighten the bullish sentiment surrounding the British Pound as it fuels interest rate expectations.
How To Trade This Event Risk(Video)
Bearish GBP Trade: U.K. CPI Slows to 1.6% or Lower
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Need red, five-minute candle following the release to consider a short British Pound trade
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If market reaction favors selling sterling, short GBPUSD with two separate position
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Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
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Move stop to entry on remaining position once initial target is hit, set reasonable limit
Bullish GBP Trade: Headline & Core U.K. Inflation Exceeds Market Expectations
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Need green, five-minute candle to favor a long GBPUSD trade
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Implement same setup as the bearish British Pound trade, just in opposite direction
Potential Price Targets For The Release