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EUR/GBP binary signal - UK Consumer Price - 16 May 2017

Signal details
Entry Price: 
0.8500
Close Price: 
No trade
Direction: 
Low
Expiry Time: 
20:00 GMT
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The UK's Office for National Statistics is expected to release the monthly consumer price index data for the UK. Economists polled are forecasting that consumer price index (CPI) rose 2.6% on a year over year basis in April, accelerating from 2.3% increase posted the month before. Excluding food and energy, the core CPI is expected to rise 2.2%, up from 1.8% previously. This would put both the headline and core CPI well above the Bank of England's inflation target. The data is expected to be released at 0930 GMT today.

While the CPI data might be bullish for the British pound, it will have larger implications as wages remain the crucial part to the puzzle. Wages in the UK have struggled to keep up with the pace of increase in consumer prices.
This will potentially put a squeeze on household income and spending as consumers end up saving more than spending. While this could potentially signal that inflation might come down at a later stage, the current acceleration in inflation is attributed not to demand but to a weaker exchange rate.

The Bank of England officials already cautioned last week that wages and inflation will be closely watched. The central bank has been flagging these two elements s key risk since the past few policy meetings. Later in the week, the monthly jobs report will also be announced which will shed light on how wages are keeping up with the pace of increase in inflation.

Based on the above factors, today's recommendation for binary options signal is EURGBP. The euro posted strong gains yesterday across the board, including the British pound. EURGBP posted three consecutive days of gains with price briefly rising to a fresh one-month high. However, the strong pace of gains will post a possible pullback, as prices are seen turning flat in the near term. Therefore, purchase daily PUT options at 0.8500 for a 20:00 GMT expiry time.

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.