The last news report we were watching was on the UK CPI y/y report. The expected number on this was to be at 2.6% and the actual numbers came out at 2.5%. The 0.1% deviation was not good enough to move the price level dramatically enough and true enough it didn’t. As we were expecting a deviation of 0.2% at least before we can enter the trade, this was a no go and we didn’t place any trades on this speculation.
For today, Apr 16th, Wednesday, we have 2 tradeable reports coming out. We will be focusing on the US Core CPI m/m report. This report is the derivative of the Consumer Price Index (CPI) that excludes the Food and Energy items. Food and Energy account for roughly 25% of CPI, but they can be very volatile from month to month and can distort the overall picture. CPI with the exclusion of these volatile components is thought to be a better indicator of the underlying inflation trend. You can therefore understand the importance of this report and our deviation range of 0.1% shares how sensitive the market is to this report.
Therefore, any deviation of 0.1% either direction is safe enough for a trade to be placed. This report will be released at 0830 hrs NY Time, 2030 hrs, SGT time. With the number targeted at 0.2% as the forecast, a release of 0.1% and lower should be weak for the dollar and you can long GBP/USD. If the report is released at 0.3% and higher, it will be good for the dollar and i feel that you can go short on GBP/USD.
I will be using USD/JPY to trade on this pair though due to spread levels at these times on the cable. Good luck for your trades.
Take care & God bless,
Seeni
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