UK CPI preview: What to expect of GBP/USD?

GBP/USD is seen consolidating the downside ahead of 1.32 handle, with the bears taking a breather amid a slightly risk averse market conditions, as the Euro Stoxx 50 futures drop -0.50% in early European trading.

Moreover, a cautious tone prevails in the market also in anticipation of the UK inflation report, the first one after the Brexit vote. The much-awaited UK inflation report is due to be published at 8.30GMT.

UK CPI to tick higher in June

The UK consumer prices are expected to have risen 0.4% in June y/y, after a 0.3% reading booked in May. While core figures, excluding volatile food and fuel costs, are expected to tick higher to 1.3% from 1.2% booked in May.

However, most banks believe, despite expectations of a better CPI print, any downside surprise cannot be ruled out as the retailers and consumers had held-off any fresh transactions ahead of the EU referendum.

Analysts at TD Securities note, “Price surveying was conducted prior to the EU Referendum date, and while sterling depreciation has been steady since November of last year, it’s likely that at this point many retailers were still holding off on any exchange rate-driven boost to prices on the assumption that Remain would win and the currency rebound. Continued referendum uncertainty would have also created a challenging environment for retailers to pass on any possible cost increases, so we look for soft gains on a monthly basis.”

GBP/USD Technical Levels

Haresh Menghani, Analyst at FXStreet believes, “1.3300-1.3315 horizontal area seems to act as intermediate resistance on the upside, above which the pair seems all set to extend its near-term recovery trend immediately towards 1.3650 resistance area.”

“On the flip side, 1.3120-1.3100 region now seems to act as immediate support, which if broken might negate the bullish reversal pattern and turn the pair vulnerable to continue drifting lower in the near-term. Below 1.3120-1.3100 immediate support, the pair is likely to extend its bearish momentum back towards 1.3000 psychological mark, before heading towards its next major support near 1.2900 region.”