0430 UK CPI y/y headline (+4.9% expected, +4.5% prior, +4.5% to +5.2% range)
Affiliated reports:
-Headline CPI m/m (+0.4% expected, 0.6% prior, +0.1% to +0.6% range)
-Core CPI y/y (+3.2% expected, +3.1% prior, +3.0% to +3.3% range)
-UK RPI y/y (+5.4% expected, +5.2% prior, +5.1% to +5.8% range)
-UK RPI m/m (+0.5% expected, +0.6% prior, +0.3% to +1.0% range)
A flat reading on the headline y/y and m/m although a +0.1 on the Core y/y figure, the
GBPUSD only staged a small whipsaw and then went choppy. In August a +0.1 on all 3 figures
caused an initial 25 pip pop which after about 15 minutes of consolidation grew some wings
and developing some move upward momentum, peaking about 2 hours later with a 70 pip gain,
but after the US session opened the pair again made further upward gains. There have even
been good moves on just -/+0.1 or if the figure if there is a rumor or expectation of a lower
or higher number which doesn't materlise cable can reverse any pre-news moves. This is why
we got such a good move in August off this smaller deviation, although notice that all 3
figures did agree, in contrast to the September release. In July a -0.3 gave the pound a
50-70 pip drop in the initial 1st minute, however the pair reversed after this initial dip,
there was no downward momentum continuation giving afterspike trading opportunities. This
month the expectations for this number are much higher, moving to +4.9 from last month's +4.5,
and with the APF being hiked by 75 billion a couple of weeks ago, certainly more inflation is
on the way, but the BOE has made a decision to sacrifice inflation to help prop up growth.
Watch the rumor mill heading into the release, as this can move cable alot pre-release and
then if the rumor is not true this move will reverse, sometimes this is the main driver of
price action and not the deviation. A +/-0.3 is a safe deviation, you could try +/-0.2 and
it should also work, but makes sure the other 2 figures agree. If a rumor comes out before
the release you can adjust your triggers accordingly. Say the rumor is of a low figure, and
Sterling sells off into the release, then you can tighten your buy trigger as there should be
a quick unwinding of the "sell the rumor, buy the news" trade.
If it comes out at 5.1% or higher, GBP/USD should rally 40-70 pips
If it comes out at 4.3% or lower, GBP/USD should fall 40-70 pips
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