UK CPI Preview: Inflation expected to rise 4.2% in January, though lower than the month before

Pound Sterling traders keenly await the release of the high-impact Consumer Price Index (CPI) data from the United Kingdom (UK) on Wednesday, for fresh hints on the timing of the Bank of England’s (BoE) first interest rate cuts this year, as the BoE policymakers continue to push back against expectations of early rate cuts.

The Office for National Statistics will release the top-tier UK CPI data for January on Wednesday. Headline and core annual inflation from the United Kingdom are set to rise, while monthly CPI is likely to fall. The UK CPI report is set to influence the BoE’s interest rate path, rocking the Pound Sterling.

Conversely, GBP/USD could break the consolidative phase to the downside if the UK CPI data surprises to the downside and revives BoE easing expectations as early as May. Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “The GBP/USD pair continues to range between two key technical barriers, with the 14-day Relative Strength Index holding below the midline, suggesting that risks remain skewed to the downside for the Pound Sterling.

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