4:30am NY Time UK CPI y/y Forecast 3.6% Previous 2.9%
ACTION: GBP/USD BUY 3.9% SELL 3.3%
We’ll be focusing on the CPI release out of UK today using a surprise factor (or deviation) of 0.3%. If the yearly Inflation number increases to a surprise of 3.9%, which is way over BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 3.3% or less, we’ll look to SELL GBP/USD. Historically, even with a small difference of 0.1%, market tend to overreac. If our deviation is hit, there is a probability of over 80% that the market will move 50 pips within the next 30 minutes.
As it is the rule when CPI rises above 3.0% an automatic inflation letter is trigger from BOE Governor King to the Exchequer Darling explaining why inflation is above 3.0%. Therefore, if we do get a 4.0% or above CPI release, expect GBP to turn bullish significantly as this inflation letter will send a message that MPC may be looking at possible rate hikes to curb inflation. However, the last quarterly BOE Inflation report did mention a stronger than expected first quarter inflation in UK, therefore the market may have priced in this release ahead and we may see a typical “buy on rumor and sell on news” type of market reaction… Unless the release really surprises the market to buy GBP, 80% of the time we could see a strong sell off even if the release is inline or slightly better.
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”.
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- Trading Canada Core CPI 04/23/10…
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{ 4 comments… read them below or add one }
hi henry,i downloaded your currency strength meter but i have been having difficulties in using it,i mean the default numbers does not change and actually i use it while i am connected to the internet.please tell me how i can start using it.
You need to use the DDE server on your Metatrader Platform. Make sure you watch the video for more installation instruction.
http://www.currencystrengthmeter.com
hi, pls where do I get the video analysis for the UK MPC news trading?
There is no trade, therefore no video for this release.