- Inflation is set to remain steady in the UK, just below the BOE's target.
- Brexit is in the limelight, but the release could have a meaningful impact in the short term.
- The risks are skewed to the upside due to several reasons.
The UK publishes the inflation report for February on Wednesday, March 20th, at 9:30 GMT.
The headline Consumer Price Index stood at an increase of 1.8% in January, and a repeat of the same number is on the cards for February. Core CPI was at 1.9% and also here, a repeat is on the cards. The Retail Price Index is also projected to remain unchanged, 2.5% in this case.
Producer Prices are set to see more significant fluctuations, but they rarely have a role in moving GBP/USD.
And as Brexit news are all the rage, what can move GBP/USD?
The inflation report is still a top-tier economic indicator, and the recent past has shown that substantial economic releases still have an impact, even if limited in movement and the timing of the effect.
UK inflation rose in the aftermath of Brexit and the lower exchange rate but has since stabilized. The slide in oil prices experienced late in 2018 pushed global headline inflation lower. The recent increase has yet to have a significant impact on consumer prices.
Three reasons why risks are skewed to the upside
1) Brexit is looking better: At the time of writing, Brexit is not set to happen on March 29th but will be delayed. The rejection of a no-deal Brexit and the scope of a delay or perhaps even a cancellation of the UK's exit has already set GBP/USD on an upwards trajectory.
2) Upbeat jobs report: The UK reported a drop in the unemployment rate to 3.9% and an upbeat pace in wage growth: 3.4%. A second consecutive optimistic figure will paint a rosy picture of the UK economy ahead of the Bank of England's rate decision on Thursday.
3) Expecting Fed dovishness: The third positive bias comes from the other side of the Atlantic. The US Federal Reserve announces its rate decision later on Wednesday and markets expect a repeat of the dovish stance. The Fed is on course to reiterate its message of "patience" regarding interest rates. This speculation weighs on the greenback.
All in all, the wind is currently blowing in favor of GBP/USD bulls. An inflation rate of 1.9%, 2%, or higher will thus go with the current trend and could propel the pound to higher ground.
What if the data falls short of expectations? In this case, the pound/dollar could slide, but the downing is not expected to be anywhere near devastating.
Conclusion
The UK inflation is expected to show stability on all the critical numbers. While the Brexit focus limits the moves, an upside surprise has a higher chance of making an impact.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
![EUR/USD stays below 1.1100, looks to post weekly losses](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/european-euro-coin-on-top-of-american-dollar-bill-11292130_XtraSmall.jpg)
EUR/USD stays below 1.1100, looks to post weekly losses
EUR/USD continues to trade in a narrow range below 1.1100 and remains on track to end the week in negative territory. Earlier in the day, monthly PCE inflation data from the US came in line with the market expectation, failing to trigger a reaction.
![GBP/USD struggles to find a foothold, trades near 1.3150](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/iStock-157771037_XtraSmall.jpg)
GBP/USD struggles to find a foothold, trades near 1.3150
GBP/USD stays on the back foot and trades in negative territory at around 1.3150 on Friday. The US Dollar holds its ground following the July PCE inflation data and doesn't allow the pair to stage a rebound heading into the weekend.
![Gold retreats toward $2,500 ahead of the weekend](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/gold-bars-50657756_XtraSmall.jpg)
Gold retreats toward $2,500 ahead of the weekend
Gold stays under modest bearish pressure and declines toward $2,500 in the American session on Friday. The 10-year US Treasury bond yield edges higher toward 3.9% after US PCE inflation data, causing XAU/USD to stretch lower.
![Week ahead – Investors brace for NFP amid Fed rate cut speculation](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/america-back-to-work-gm178972493-25143312_XtraSmall.jpg)
Week ahead – Investors brace for NFP amid Fed rate cut speculation
Here comes another NFP week, with investors eagerly awaiting the results as they try to discern the size and pace of the Fed’s forthcoming rate cuts. The weaker than expected July numbers triggered market turbulence, instilling fears about a potential recession in the US.
![Easing Eurozone inflation to back an ECB rate cut in September](https://editorial.fxstreet.com/images/Macroeconomics/Countries/Europe/Eurozone_countries/Eurozone/eu-flags-flying-at-the-european-commission-building-brussels-belgium-24759579_XtraSmall.jpg)
Easing Eurozone inflation to back an ECB rate cut in September Premium
Eurostat will publish the preliminary estimate of the August Eurozone Harmonized Index of Consumer Prices on Friday, and the anticipated outcome will back up the case for another European Central Bank interest rate cut when policymakers meet in September.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.