Headline U.Ok. inflation accelerated from 3.4% year-on-year to three.6% in June whereas the annual core CPI climbed from 3.5% to three.7% as an alternative of holding regular as anticipated.
How did our watchlist setups for this top-tier catalyst fare?
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The Setup
Occasion End result:
The UK’s shopper worth inflation accelerated to three.6% year-on-year in June, up from 3.4% in Could, marking the best studying since January 2024 and doubtlessly dampening expectations for aggressive Financial institution of England price cuts within the close to time period.
Key Factors from the June CPI Report
- Headline CPI rose to three.6% yearly, above the 3.4% consensus forecast, with month-to-month inflation climbing 0.3% versus 0.1% in June 2024
- Core CPI (excluding vitality, meals, alcohol, and tobacco) elevated to three.7% from 3.5% in Could, signaling persistent underlying worth pressures
- CPIH (together with proprietor occupiers’ housing prices) climbed to 4.1% from 4.0%, remaining nicely above the Financial institution of England’s 2% goal
- Transport prices, significantly motor fuels, offered the biggest upward contribution to the month-to-month change, whereas housing and family companies provided some offset
- Companies inflation held regular at 4.7%, whereas items inflation accelerated from 2.0% to 2.4%, marking the best items inflation since October 2023
- Meals and non-alcoholic drinks inflation edged as much as 4.5% from 4.4%, persevering with a 3rd consecutive month-to-month improve
Basic Bias Triggered: Bullish GBP Setups
This week’s market drama in all probability had merchants reaching for his or her stress balls greater than normal. It began with Trump’s weekend bombshell – threatening 30% tariffs on EU and Mexico by August 1st. Markets initially freaked out, then shrugged it off as “simply one other negotiating tactic.”
Tuesday’s US CPI hit precisely as anticipated at 2.7%, however the satan was within the particulars. Furnishings and equipment costs spiked, seemingly signaling tariffs are lastly biting customers. This in all probability spooked bond markets greater than equities, with the 10-year yield leaping to month-high ranges.
Wednesday introduced the week’s most weird subplot – nameless studies that Trump was prepared to fireplace Fed Chair Powell. The greenback and bonds went haywire earlier than Trump shortly dismissed it as “extremely unlikely.” Traditional Washington drama that reminded everybody why Fed independence issues.
Thursday’s knowledge dump was the place fundamentals lastly received. US retail gross sales crushed expectations (+0.6% vs +0.2% forecast) and jobless claims plummeted to 221k – manner beneath the 234k estimate. This in all probability strengthened the “American shopper is constructed totally different” narrative conserving recession fears at bay.
Friday capped issues off with Fed Governor Waller going full dove, calling for a 25bp July lower. The greenback took a beating, falling practically 1% earlier than recovering.
EUR/GBP Internet Bullish GBP Occasion consequence + Danger-OFF Situation = Arguably greatest odds of a web optimistic consequence
EUR/GBP 1-hour Foreign exchange Chart by TradingView
In our watchlist, we noticed EUR/GBP approaching R1 (.8690) close to the .8700 main psychological mark whereas forming a bearish divergence, suggesting that ceiling might maintain in case the U.Ok. CPI report is available in stronger than anticipated. Our thesis was primarily based on decrease U.Ok. tariffs publicity versus uncertainty surrounding US-EU commerce negotiations.
Though the pair already retreated from the resistance zone forward of the inflation launch whereas Uncle Sam’s personal inflation figures ushered in a little bit of danger aversion, worth managed a short pullback then resumed its bearish transfer when the U.Ok. numbers had been printed, dipping to the .8650 minor psychological mark.
Rumors of Trump on the point of hearth Powell brought about foreign money markets to whipsaw later within the day, main EUR/GBP to spike again to the .8700 space midweek earlier than draw back stress picked up once more, even after the U.Ok. jobs report fell wanting estimates the subsequent day.
Rising doubts in regards to the EU and the U.S. reaching a commerce settlement anytime quickly appeared to maintain the shared foreign money on shaky floor, together with subdued closing inflation readings for the area, ultimately dragging EUR/GBP to the subsequent help zone on the pivot level stage (.8640).
Not Eligible to maneuver past Watchlist – Bearish GBP Setups and GBP/USD lengthy setup
GBP/USD: Bullish GBP Occasion consequence + Danger-On Situation
GBP/USD 1-hour Foreign exchange Chart by TradingView
Whereas the occasion supported a bearish setup on GBP/USD, broader market sentiment main as much as the precise U.Ok. CPI launch didn’t fairly align with a risk-on view. Buyers had been on edge whereas making an attempt to remain on prime of Trump’s tariffs bulletins, blended Chinese language knowledge, and warmer than anticipated U.S. inflation.
Consequently, there wasn’t sufficient bullish momentum to propel Cable as much as the pullback areas we eyed near the descending development line even when U.Ok. CPI knowledge got here in stronger than anticipated. As an alternative, the pair already established recent weekly lows across the 1.3400 help zone earlier than making a feeble transfer larger when the numbers had been printed.
Larger volatility stemming from market anxiousness on Trump probably firing Fed head Powell led to a a lot bigger pullback to the 100 SMA dynamic resistance within the subsequent buying and selling session, earlier than GBP/USD dipped then bounced off the 1.3400 deal with once more.
GBP/JPY Brief: Internet Bearish GBP Occasion consequence + Danger-Off Situation
GBP/JPY 1-hour Foreign exchange Chart by TradingView
Guppy had been consolidating inside a descending triangle sample forward of the U.Ok. CPI launch, doubtlessly gearing up for a breakdown in case the precise outcomes fall wanting estimates. The pair already staged a bullish breakout even earlier than the U.Ok. inflation report was printed, however the transfer was primarily pushed by yen weak point on account of rising JGB yields from election jitters.
Stronger than anticipated U.Ok. inflation knowledge didn’t fairly set off a lot of a bullish response from this pair, as safe-haven currencies just like the yen held their floor whereas rumors of Trump probably firing Powell circulated. GBP/JPY tumbled to the pivot level stage (198.51) as risk-off flows picked up then rebounded when Trump downplayed the probability of sacking the Fed Chair.
GBP/AUD Brief: Bearish GBP Occasion consequence + Danger-On Situation
GBP/AUD 1-hour Foreign exchange Chart by TradingView
This sterling pair had already been working with sustained bearish stress from the earlier week, weighed by a dovish BOE MPC cut up and a shock RBA resolution to maintain charges on maintain as an alternative of chopping.
GBP/AUD appeared to type a bearish flag at its long-term help stage simply above the two.0500 main psychological mark, so our watchlist anticipated doable downtrend continuation if the U.Ok. CPI falls wanting estimates.
Whereas worth dipped barely beneath the short-term consolidation sample on some indicators of resilience in Chinese language knowledge throughout the Asian session, a surge in risk-off flows stemming from talks of Trump probably firing Powell took the pair proper again above the two.0500 deal with earlier than the U.Ok. inflation report was launched.
Stronger than anticipated U.Ok. inflation figures allowed the pair to maintain the rebound, climbing again above the 100 SMA dynamic inflection level and increasing its rally previous the two.0600 deal with when Australia’s jobs report fell wanting estimates the subsequent day. GBP/AUD carried on to check the two.0700 resistance because the U.Ok. jobs launch got here in stronger than anticipated within the following session.
The Verdict
Our basic evaluation and watch state of affairs primarily based on a risk-off market setting and a web bullish GBP response leaned in favor of a brief EUR/GBP setup.
Our technical evaluation pinpointed the .8700 resistance zone close to S1 as a possible space of curiosity for brief entries forward of the occasion, plus the pair probably conserving its actions beneath this ceiling ought to the market temper proceed to lean risk-off after the U.Ok. CPI launch.
Though intraday swings in sentiment led to extra elevated volatility than normal, EUR/GBP managed to maintain its head beneath the .8700 ceiling highlighted in our watchlist and resume its selloff when the EU CPI closing readings highlighted a distinction in inflation traits with the U.Ok.
General, we assess this as seemingly supportive of a web optimistic consequence since GBP was already having fun with some upside momentum main as much as the inflation launch and managed to renew its advance versus EUR after market volatility settled.
Nonetheless, commerce administration and execution would have performed a minor function, as whipsaws may need been difficult to navigate however would have additionally provided one other alternative to enter on the .8700 resistance earlier than EUR/GBP bearish momentum picked up.
Key Takeaways: When Favorable Fundie Knowledge Doesn’t Assure Sturdy Constructive Outcomes
The UK inflation shock completely illustrates a vital buying and selling actuality: even when financial knowledge strongly helps your directional bias, market reactions will be disappointingly muted or fully opposite to expectations. Regardless of UK CPI accelerating to three.6% (vs 3.4% forecast) and core inflation leaping to three.7% – clear bullish alerts for GBP – the pound’s response was surprisingly subdued and we should always have gotten a way more favorable response in EUR/GBP.
Why? As a result of markets hardly ever commerce in isolation. Throughout this week, competing narratives dominated: Trump’s tariff threats, Fed Chair firing rumors, and broader danger sentiment shifts overshadowed what ought to have been a simple bullish catalyst for sterling. The GBP/USD setup, which technically aligned completely with a bullish state of affairs, struggled to achieve significant traction regardless of the inflation beat.
This disconnect between knowledge and worth motion occurs extra usually than merchants understand. You’ll be able to nail the elemental name, place your self at very best technical ranges, and nonetheless watch the market shrug off your “good” setup. Exterior elements – whether or not geopolitical drama, cross-asset correlations, or easy market exhaustion – regularly hijack anticipated reactions.
That is exactly why inflexible place sizing and predetermined exit methods matter greater than being “proper” in regards to the knowledge. When markets ignore robust fundamentals, merchants with out correct danger administration usually double down on dropping positions, satisfied the market will “come to its senses.”
The lesson? Commerce what the market offers you, not what the info suggests it ought to provide you with. Your cease loss doesn’t care about your basic thesis.
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