When is the UK inflation data and how could it affect GBP/USD?

The UK CPIs Overview

The cost of living in the UK as represented by the Consumer Price Index (CPI) for May month is due early on Wednesday at 06:00 GMT.

Given the recently released upbeat UK employment data, coupled with the hawkish concerns about the Bank of England’s (BOE) next moves, today’s British inflation numbers will be the key for the GBP/USD traders. Also increasing the importance of the UK CPI is the looming BoE Interest Rate Decision, on Thursday.

That said, the headline CPI inflation is expected to ease to 8.4% YoY in May, versus 8.7% prior. Further, the Core CPI, which excludes volatile food and energy items, is likely to remain unchanged at 6.8% YoY. Talking about the monthly figures, the CPI could ease to 0.5% versus 1.2% prior.

Also important to watch is the Retail Price Index (RPI) figures for May, expected to mark a reduction to 0.5% MoM and 11.2% YoY versus 1.5% and 11.4% priors in that order.

How could it affect GBP/USD?

GBP/USD stays defensive above 1.2750 as it lacks follow-through amid the cautious mood in the market and the US Dollar’s corrective bounce. Also challenging the Cable pair buyers are the latest doubts on the UK banking sector’s health, as well as the geopolitical pressure on UK PM Rishi Sunak. However, upbeat UK employment numbers and the Bank of England (BoE) policymakers’ push for higher rates keep the Cable buyers hopeful ahead of the key British inflation data.

That said, considering the recent improvement in the British data and expectations of overcoming the labor problems, the softer UK inflation data may help the GBP/USD bears to retake control. It’s worth noting that a positive surprise from the UK CPI or Core CPI should be traded with a pinch of salt amid hawkish Fed bets.

Technically, Given the overbought RSI (14) line and the Cable pair’s inability to stay beyond the key resistance line, the GBP/USD bears are well-set to extend the previous two-day downtrend. However, the previous monthly high join the 10-DMA to highlight the 1.2685-80 region as the short-term key support zone for them to conquer to tighten the grip.

Key notes

GBP/USD Price Analysis: Cable dribbles around resistance-turned-support near 1.2770 ahead of UK inflation

GBP/USD retraces below 1.2800 on a strong USD, ahead of Powell testimony, BoE’s decision

About the UK CPIs

The Consumer Price Index released by the Office for National Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of the GBP is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as positive (or bullish) for the GBP, while a low reading is seen as negative (or Bearish).