Trading Volatility: UK inflation data for GBP/USD
For the week starting Monday 20 May traders will be looking ahead to mid-week with the release of the full round of UK inflation data.
It is likely to generate raised levels of volatility for GBPUSD. Consumer prices, or CPI, is likely steal the show, but there is also producer price and retail prices to underpin the release. UK headline CPI YoY forecast to drop from 3.2 to 2.7% core CPI (without food and fuel) down from 4.2 to 3.6%. So where's the risk? Well if there's a read-through from this week's US inflation which gave us a ray of hope is the risk to the downside. IGTV’s Jeremy Naylor looks at the potential performance of GBP/USD.
(Video Transcript)
UK inflation data
Now let's take a look at a risk event for the week starting Monday, the 20th of May. I'm looking forward to midweek next week, Wednesday, the 22nd release of the full round of UK inflation data. And it's like generate raised levels of volatility around sterling against whichever currency you want to trade it at. But I'll be taking a look at what's happening with Sterling against the US dollar.
As ever, it's consumer prices that will likely steal the show. Although there is the release of the producer prices, there's the release of at retail prices as well. I want to take a look at the chart where we could well see this volatility potentially trading as we go into the start of the European trading day on Friday. As we look ahead to this number at one 2663 UK headline CPI forecast, a drop from 3.2 to 2.7% core CPI, that's without food and fuel, down from 4.2 to 3.6.
US inflation
So potentially there is the possible risk on the downside. That's if we get a read through from this week's US inflation gave us a ray of hope that the risk is to the downside. So let's set up a trade here. If you're short at one 2663, your stock is above the 127 level and the levels to watch out for this is the main level down here at 123, but we're unlikely to get there in any way, shape or form if you do nonetheless get a very weak number.
The Bank of England
But I think what it's going to do is go to highlight the fact the Bank of England is likely to cut interest rates in August. So from one 2663 price target, one 2446, these lows that we had hit back on the 9th of May and I suspect if you do this correctly and it does move in the way I expect if we do get that downside, that's the stop loss.
Stop loss goes above the 127 level, which will give you the protection if it does continue to move in this with the direction, continue to bring us stop loss to lock in profits.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market.
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.