UK consumer prices expended at the fastest annual pace in nearly two years during the previous month. According to the Office for National Statistic, the annual rate of CPI inflation equals 1%, up from 0.6%in August and slightly higher than economists had been expecting. It is worth to point out, that this is the biggest monthly increase in the cost of household goods and services since November 2014. The following jump in inflation will cost poorer households around 100 pounds each, as their benefits will not advance in line with CPI. Meanwhile, the main upward pressure on consumer price index came from an acceleration of clothing and footwear price tags - namely women's clothes. The clothing prices went up 6% between August and September, compared a 3.3% rise over the same period last year. Moreover, the Office for National Statistics highlighted there were no 'explicit' signs that the weakness of the sterling contributed to the rose in CPI.
In the meantime, the Retail Prices Index measure of inflation, which includes housing costs, has also expanded to 2 % in September from 1.8% in August.
UK Labor Market data and US Beige Book are the main events
GBP/USD sets eye on 1.24
The British currency received a boost from a good CPI reading yesterday, successfully climbing over the 1.23 mark. As a result, the Sterling could post more gains against the US Dollar, with the next target being the 1.24 level. However, the 1.24 mark is bolstered by the weekly R1, which could prevent the Cable from edging above 1.2390. Meanwhile, technical indicators are giving mixed signals in all timeframes, creating a possibility for a corrective decline to occur. In this case the immediate support area will doubtfully limit the losses, with the pair sliding back to 1.22.
Daily chart
Hourly chart
Traders mostly bullish
Today 63% of traders have a positive outlook towards the Pound, compared to 66% on Tuesday. There has been a solid increase in the share of purchase orders, namely from 39 to 47%
A similar situation is observed elsewhere. For example, 60% of positions open at OANDA are currently long. This is more than the share of shorts (40%), more than sufficient for the sentiment to be called bullish. Similarly, sentiment at Saxo Bank is also bullish, with 66% of traders being long and 34% being short the Sterling against the US Dollar.
Spreads (avg, pip) / Trading volume / Volatility
Traders expect no major changes
By the end of the next three months traders expect the Cable to be higher than the level where it is now. While the current price is around 1.23, the average forecast for January 19 is 1.2733. Furthermore, the 1.28-1.30 interval is now the most popular one, having 15% of the votes. On the second place in terms of the votes is the 1.32-1.34 (12%) interval, followed by the 1.20-1.22 price range with 9% of the votes. Moreover, 64% all survey participants believe the Cable is to fall under 1.30.