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GBP/USD forex signal - UK Inflation Data - 20 Mar 2018

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A busy week for the British pound starts off today with the release of the monthly inflation data. Given that consumer prices have surged since the Brexit vote, the Bank of England has been battling to contain inflation which has sapped the consumer spending power amid low wage growth.

The inflation data will be released today by the UK's Office for National Statistics. According to the economists polled, headline consumer price index is expected to rise at a slower pace of 2.8%. This marks a slowdown compared to January's price increase of 3.0%. Core CPI, which excludes food and energy prices are forecast to rise 2.5%, marking a slower pace of increase.

With both headline CPI and core CPI expected to rise at a slower pace, this could potentially give the Bank of England officials to mull over interest rate hikes amid slower wage growth.

Inflation on the factory gate is forecast to post a 0.9% decline on the PPI input. The decline in input prices could bode well for consumer prices in the coming months. The PPI output is tipped to rise 0.1% on a month over month basis, rising at a steady pace. Given that the British pound's exchange rate has increased quite a bit, the higher exchange rate is also expected to play a role in slowing down of inflation.

A slower pace of consumer price increases will be a welcome change for the officials at the BoE. However, this is unlikely to deter officials from hiking interest rates for a second time during the later part of this year.

The British pound has managed to remain supported around the 1.3902 level of support. However, given that price has failed to post any significant gains above this support level could indicate potential weakness in the currency pair and the support level itself.

In the near term, we expect GBPUSD to potentially post a decline back to 1.3800 region. This could mean a retest of this support level. The price action suggests that short positions can be taken around 1.4023 level targeting 1.3800 with stops at 1.4051 as we expect to see price pushing higher on the day.

forex signal gbpusd 20 mar 2018

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. 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. All risks and coasts associated with online trading are your responsibility.