4:30am (NY Time) UK CPI y/y Forecast 1.3% Previous 1.6%
ACTION: GBP/USD BUY 1.5% SELL 1.1%
Our surprise factor (or deviation) is at 0.2%. If the yearly Inflation number increases to a surprise of 1.5% then we will BUY of GBP/USD. If the Inflation number decreases to 1.1% or less, we’ll look to SELL GBP/USD. Historically, even at a difference of 0.1%, we tend to see the market overreact. If our S. Factor gets hit, there is a probability of over 80% that the market will move 50 pips within the next 30 minutes.
Even with the recent MPC Rate Decision leaving both Official Interest Rate and the APF program unchanged, Cable is still the biggest loser out of all major currencies. If this release were to support Sterling with a less than expected decline in inflation, GBP could start to recover from recent losse; however, if we get a less than 1.0% yearly reading, Sterling may start to drop sharply as 1.00% yearly CPI is a psychological number.
“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households wikipedia).” It is also known as the “True Cost of Living”.