Henry Liu
Former FPA Special Consultant
- Messages
- 473
We’ll be trading the UK Consumer Price Index (CPI) release at 4:30am NY Time today. We’ll be looking at the yearly release figure and the market could react with lots of volatitility as CPI is the basic measurement of Inflation, therefore expect to see more exaggerated moves if we get a huge surprise release. Here is the forecast:
4:30am NY Time UK CPI y/y Forecast 3.1% Previous 3.1%
ACTION: GBP/USD BUY 3.4% SELL 2.8%
The Trade Plan
We are looking for a safe deviation of 0.3% for SELL and 0.3% for BUY. If the Inflation number increases to of 3.4%, which is way above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 2.8% or less, we’ll look to SELL GBP/USD. Historically, even with a slight difference of 0.1%, market usually overreacts. If our deviation is hit, there is a strong possibility that the market will move 50 pips immediately.
We'll be looking to trade this release using my after-news retracement method. We'll wait for the release, wait for market spike, then wait for a decent retracement before jumping in. For more information on my trading methods:
Henry's News Trading Methods.
The Market
Medium forecast of 28 economists surveyed by Bloomberg expect CPI y/y figure to be around 3.1%. With inflationary pressure remaining resilient for UK for the better part of 2010 (so far), traders are now expecting more of a rate hike scenario than further quantitative easing, although BOE's official story is that both scenarios are likely.
With GBP remaining neutral against USD and strong against other majors, in the event of 3.1% or more, expect support for the currency to remain steady... However, unless we get a significantly lower release, such as 2.5% representing a sharp drop off, market should still be bullish for the Sterling in the long run.
Additional Thoughts
GBP may ultimately remain in a tight range unless CPI shows a strong surprise, either way. However, on an inline with expectation release, market will probably resume back to the general trend, which is USD strength.
Pre-news Consideration
I believe we should stay out of the market before the release.
DEFINITION
“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households Wikipedia).” It is also known as the “True Cost of Living”.
Historical Data & Chart For UK CPI y/y
Thanks,
4:30am NY Time UK CPI y/y Forecast 3.1% Previous 3.1%
ACTION: GBP/USD BUY 3.4% SELL 2.8%
The Trade Plan
We are looking for a safe deviation of 0.3% for SELL and 0.3% for BUY. If the Inflation number increases to of 3.4%, which is way above BOE’s inflation target, we will BUY of GBP/USD. If the Inflation number decreases to 2.8% or less, we’ll look to SELL GBP/USD. Historically, even with a slight difference of 0.1%, market usually overreacts. If our deviation is hit, there is a strong possibility that the market will move 50 pips immediately.
We'll be looking to trade this release using my after-news retracement method. We'll wait for the release, wait for market spike, then wait for a decent retracement before jumping in. For more information on my trading methods:
Henry's News Trading Methods.
The Market
Medium forecast of 28 economists surveyed by Bloomberg expect CPI y/y figure to be around 3.1%. With inflationary pressure remaining resilient for UK for the better part of 2010 (so far), traders are now expecting more of a rate hike scenario than further quantitative easing, although BOE's official story is that both scenarios are likely.
With GBP remaining neutral against USD and strong against other majors, in the event of 3.1% or more, expect support for the currency to remain steady... However, unless we get a significantly lower release, such as 2.5% representing a sharp drop off, market should still be bullish for the Sterling in the long run.
Additional Thoughts
GBP may ultimately remain in a tight range unless CPI shows a strong surprise, either way. However, on an inline with expectation release, market will probably resume back to the general trend, which is USD strength.
Pre-news Consideration
I believe we should stay out of the market before the release.
DEFINITION
“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households Wikipedia).” It is also known as the “True Cost of Living”.
Historical Data & Chart For UK CPI y/y
Thanks,
Last edited by a moderator:
