The upcoming UK CPI report is critical for shaping expectations around the BoE’s monetary policy. With services inflation at 5% y/y in November, well above the 2% target, the report’s outcome could significantly impact GBPUSD. A softer-than-expected print may pressure GBP, with past CPI events showing falls of up to -1.97%. Traders should watch the 1.2100 support level and consider historical patterns to refine their strategies.
On Wednesday the US CPI data is released. The EURUSD has been weighed down this week on the strong NFP print from Friday, with the headline jobs number coming in above the 12 month average, and the weekend results from the European Parliamentary elections.
This CPI print is in a major focus as investors want to know whether the Bank of England is winning the inflation battle. A surprise print to the upside or the downside is likely to send the GBP on a sharp move, but how much of a move can be expected?
On Wednesday we have the US CPI print being released and it is a major focus for the Fed. In the last Fed meting, on May 01, the Fed confirmed that recent US inflation data had been disappointing. In the Press Conference Powell said, when asked about the prospect of 3 cuts this year, that the Fed needs more confidence on inflation and that the Fed did not see progress in Q1.
Over the last 5 years gold has risen into and out of US CPI prints 60% of the time for an average 0.28% gain. Interestingly, the largest gain on a US CPI print in gold has been 3.11%. So, if we see a big miss in the US CPI print with the CPI MM 0.10% or lower, the Core CPI MM 0.10% or lower, the headline 3% or lower, and the CORE CPI 3.7% or lower then watch out for gold gains!
A major risk event is coming up for the US on Tuesday ahead of the Federal Reserve’s interest rate meeting on Wednesday. Although US CPI data is unlikely to change the Fed’s mind for Wednesday it will certainly set the mood and tone.
