Two hours ahead of today’s trading session, the UK released its inflation data for September. Experts’ skeptical predictions did not come true, as the annual Consumer Price Index (CPI) held at last month’s level of 3.8% instead of the projected 4%. The monthly headline figure, as well as the core one, declined from 0.3% to 0.0%.
While analyzing the potential impact of these data on the GBPUSD currency pair, it should be emphasized that the consensus forecast suggested a rise to 4%, which would have been the highest among the world's largest economies and double the Bank of England's (BoE) target.
Prior to the publication of the UK inflation report, market players had estimated the likelihood of a 25-basis-point rate cut at the BoE’s meeting in November at only 15%. A supposedly higher CPI would have reduced that likelihood to nothing.
The impact of these data extends beyond the next meeting of the central bank all the way to the end of the year, as officials have yet to reach an agreement on the future monetary path. While some of them are more concerned about the current state of the labor market in the UK, others emphasize the risks of stronger inflationary pressures. Nevertheless, the majority takes a moderate stance, advocating for gradual rate cuts.
When the actual data turned out to be softer, the situation changed dramatically. Expectations of aggressive monetary policy easing surged, causing a temporary decline in GBPUSD.
The overall recommendation is to sell GBPUSD. Profits should be taken at the level of 1.3171. Stop Loss could be set at 1.3470.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
