UK CPI | Moves in GBP

UK CPI will be released today at 9.30am GMT. Any deviation from the expected figures has the capacity to move pound significantly.

Given that the pound is already pressured by the Brexit cloud, a miss will likely drive impetus into this bearish sentiment and see a sustained move lower in GBP. Conversely, a solid beat will see some upside but the move higher may be short-lived as the potential detrimental effects of an UK exit from the EU remain in place.

Description:

CPI measures the change in the price of goods and services purchased by consumers. CPI is the most important price-related release because it is the key measure the central bank uses to assess inflation. Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because each central bank has a target inflation range which they attempt to maintain, primarily by adjusting interest rates. A change in interest rates means a change in the yield an investor receives by investing in that currency.

Summary:

The pound has been volatile in recent weeks; held down by Brexit concerns but also seeing short-lived rallies as the longer-term hawkish intentions of the BOE make the currency a comparatively attractive buy in the environment of extreme easing.

Aside from the referendum, near-zero inflation has also weighed on sterling over the last 6 months. As always, this reading is hugely important for the BoE, especially the core figure which is expected to rise a solid half percent for the month, versus January’s decline of a full -1 percent. Year-over-year Core CPI is expected at 1.2% – same as prior.

UK CPI release was also covered in weekly risk events video. You can watch it here.

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