Buying GBPUSD in case of high CPI

20 December 2023 99
Buying GBPUSD in case of high CPI

The UK consumer price index (CPI) for November will be released today. The year-on-year figure is forecast to fall by 0.2% from 4.6% to 4.3%.

At the same time, the month-to-month figure is expected to increase from 0.0% to 0.2%. That is, experts note uneven dynamics of inflationary pressure in the economy.

 

Last Thursday's surprise was the vote of the Bank of England members on the interest rate. Unexpectedly, the number of those who voted in favor of the rate hike increased against the forecast. And all this was happening amid the growing trend among the world's leading central banks to soften monetary policy. Though, such a move of the Bank of England can be attributed to the traditional British snobbery, the desire to outwardly act in contrast to the actions of the Fed.

 

This result of the vote naturally caused bewilderment among the financial community, as the British economy does not show much growth in contrast to the USA.

Last week the UK labor market data was published. All values were in the red zone, meaning that the labor market does not show any signs of strength.

 

In addition, last Wednesday the November values of the whole cross-section of the British economy were published: GDP, industrial production, construction, balance of trade. And these data also showed negative dynamics.

 

Therefore, the Bank of England's attitude towards possible monetary tightening looks extremely controversial.

To some extent, today's CPIs are able to resolve this controversial situation.

If it turns out that inflation remains high, it will push the GBPUSD pair upwards for a second attempt to pass the level of 1.28.

 

The overall recommendation is to buy GBPUSD, provided that CPI values are higher than forecasted. With other CPI values it's better to not open a position and stay out of the market.

GBPUSD profit could be fixed at the level of 1.280. Loss could be fixed at the level of 1.266.

 

This content is for informational purposes only and is not intended to be investing advice.

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