4:30am (NY Time) UK CPI y/y Forecast 1.4% Previous 1.1%
ACTION: GBP/USD BUY 1.7% SELL 1.1%
We’ll focus on the CPI release today and our surprise factor (or deviation) is at 0.3%. If the yearly Inflation number increases to a surprise of 1.7% 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 should see market overreaction. If our deviation is hit, there is a probability of over 80% that the market will move 50 pips within the next 30 minutes.
The psychological level for the yearly CPI is obviously at the 1.0% level. If CPI falls below the 1.0%, we could see accelerated sell-offs on Sterling, and an inflation letter is automatically triggered from BOE Governor King to the Exchequer explaining why inflation has fallen below 1.0%. Should the content of this letter surprises the market, the effect on the CPI release will be more exaggerated. Therefore, we shall watch the 1.00% level like a hawk.
DEFINITION
“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”.
No related posts.
{ 3 comments… read them below or add one }
1.6855 sorry type o. Trade time was four 15 minute bars.
Went short at 1.6755. Exited 50% at 50 pips and remainder at around 70 pips. Basee in price and time. Thanks for the heads up on the release. Players swept the lows and may come back now as news was favorable. Trade on the side of the players.
I like the idea about the CPI for GU – lets see what happens in 10 hours and 20 minutes from now – looks like they are starting to discount early.