Firming U.K. Consumer Price Index (CPI) To Fuel GBP/USD Recovery

– U.K. Consumer Price Index (CPI) to Uptick for Third-Consecutive Month.

- Core Inflation to Rebound to Annualized 1.4% Following the Unexpected Slowdown in July.

Trading the News: U.K. Consumer Price Index (CPI)

A pickup in both the headline and core U.K. Consumer Price Index (CPI) may encourage a larger recovery inGBP/USD as the Bank of England (BoE) faces a greater threat of overshooting the 2% target for inflation.

What’s Expected:

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Why Is This Event Important:

The BoE looks poised to further embark on its easing cycle as ‘a majority of members expect to support a further cut in Bank Rate to its effective lower bound,’ but it seems as though Governor Mark Carney will continue to rule out a zero-interest rate policy (NIRP) for the U.K. as the central bank ‘expects that by the three-year forecast horizon unemployment will have begun to fall back and that much of the economy’s spare capacity will have been re-absorbed, while inflation will be a little above the 2% target.’

Expectations: Bullish Argument/Scenario

The expanding money supply accompanied by the pickup in household earnings may boost U.K. price growth, and signs of stronger-than-expected inflation may trigger a bullish reaction in the sterling as it limits the Monetary Policy Committee’s (MPC) scope to further support the real economy.

Risk: Bearish Argument/Scenario