- U.K. Inflation to Slow for the Second-Month in August
- Core Consumer Price Growth to Rebound from 2013 Low
Trading the News: U.K. Consumer Price Index
The U.K. Consumer Price report may trigger a more meaningful correction in the GBPUSD as a slower rate of inflation raises the Bank of England’s (BoE) scope to retain its highly accommodative policy stance.
What’s Expected:
Time of release: 09/17/2013 8:30 GMT, 4:30 EDT
Expected: 2.7%
Previous: 2.8%
DailyFX Forecast: 2.7% to 3.0%
Why Is This Event Important:
In light of the fresh remarks coming out of the BoE Testimony, it seems as though the central bank will toughen its stance to achieve the 2% target for price growth, and the central bank may start to adopt a more hawkish tone for monetary policy as it continues to operate under its inflation-targeting framework.
Expectations: Bearish Argument/Scenario
| Release | Expected | Actual |
| Average Weekly Earnings inc Bonus (3MoY) (JUL) | 1.3% | 1.1% |
| BRC Shop Pirce Index (YoY) (AUG) | -- | -0.5% |
| CBI Trends Selling Price (AUG) | 3 | 0 |
Nevertheless, businesses in the U.K. may continue to offer discounted prices amid the slowdown in wage growth along with the persistent slack in the real economy, and a soft inflation print may prompt a near-term reversal in the GBPUSD as market participants scale back bets of seeing the BoE move away from its easing cycle.
Risk: Bullish Argument/Scenario
| Release | Expected | Actual |
| Jobless Claims Change (JUL) | -21.0K | -32.6K |
| Net Consumer Credit (JUL) | 0.6B | 0.6B |
| Retail Sales inc Auto (MoM) (JUL) | 0.7% | 1.1% |
However, the recent pickup in private sector activity may encouraged stronger price growth in the U.K., and a better-than-expected CPI print may spark fresh monthly highs in the British Pound as we see a growing number of central bank officials turn upbeat towards the economy.
How To Trade This Event Risk(Video)
Bearish GBP Trade: U.K. CPI Narrows to 2.7% or Lower
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Need red, five-minute candle following the print to consider a short GBPUSD trade
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If market reaction favors a sell trade, 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 Inflation Tops Forecast
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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