UK inflation data awaited as GBPAUD still has room to the upside
The monthly inflation data from the UK is scheduled for release at 0930 GMT this morning. Expectations call for a 1.1% increase in the headline inflation rate for the month of October, which is a modest pickup from the 1% increase registered in September.
Following the Brexit vote and the subsequent plunge in the British pound, inflation in the UK has been surging strongly, as the data reinforces view that the Bank of England could be seen hiking interest rates in the near future.
At its most recent monetary policy meeting, the Bank of England surprised by saying that interest rate expectations remain fairly balance.
While the BoE said that it will tolerate some overshoot of inflation above the central bank's 2% target rate, the central bank said that the risks were equally balanced. This means that the BoE could be seen hiking rates if inflation continues to rise steadily.
Today's inflation data will be key, as a continued pick up in the pace of increase in consumer prices could stoke expectations for a BoE rate hike by the first quarter next year. However, the British pound has gained positive momentum after the US elections and therefore the pace of increase in headline inflation could slow.
How to trade binary
GBPAUD has formed an inside bar on the daily chart and price trades just a few points below the main resistance level at 1.6750 - 1.6700. While the bias remains to the downside, we can expect to see some more upside in GBPAUD as price is likely to retest the resistance level before falling lower.
Therefore, in this regard, look to purchase PUT options near 1.6700 - 1.6750, preferably on a one-hour close near this resistance level, for a 2100 GMT closing time. GBPAUD is likely to slide back towards the first support level at 1.6465 - 1.6495 if we do see a reversal near the mentioned resistance level.