TheNews

Trading the News: U.K. Consumer Price Index (CPI)

Another uptick in the U.K. Consumer Price Index (CPI) accompanied by a pickup in the core rate of inflation may boost the appeal of the sterling and spur a larger rebound in GBP/USD as it puts increased pressure on the Bank of England (BoE) to normalize monetary policy sooner rather than later.

What’s Expected:



Why Is This Event Important:

Even though the Monetary Policy Committee (MPC) is widely expected to preserve the record-low interest rate ahead of the U.K. Referendum in June, heightening price pressures may prompt Governor Mark Carney to adopt a more hawkish tone over the coming months as the BoE sees a risk of overshooting the 2% inflation-target over the policy horizon.

Nevertheless, U.K. firms may increase their efforts to draw domestic demand amid the slowdown in private-sector lending accompanied by the weakening outlook for the global economy, and a soft inflation report may spur a near-term selloff in the sterling as market participants push out bets for a BoE rate-hike.How

To Trade This Event Risk
Bullish GBP Trade: Headline & Core Inflation Upticks in March

• Need green, five-minute candle following the print to consider a long GBP/USD trade.
• If market reaction favors buying sterling, long GBP/USD with two separate position.
• Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is hit, set reasonable limit.

Bearish GBP Trade: U.K. CPI Report Falls Short of Market Expectations

• Need red, five-minute candle to favor a short GBP/USD trade.
• Implement same setup as the bullish British Pound trade, just in reverse.

Potential Price Targets For The Release

• GBP/USD may continue to track sideways as it preserves the March range, but the bullish tilt on the Relative Strength Index (RSI) may foster a larger rebound over the near-term especially as the pair appears to be carving an inverse head-and-shoulders formation.
• Interim Resistance: 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion)
• Interim Support: 1.3870 (78.6% expansion) and 1.4000 pivot

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