British Pound Closes Above Key Support vs. US Dollar, Japanese Yen - UK CPI Next Week

The British pound remained fairly range bound on Friday, as GBPJPY closed above support at 156.00 and GBPUSD remained contained to 1.6485-1.6600. There was no UK data on hand, but this will change on August 18 as the UK’s consumer price index (CPI) reading for the month of July is expected to fall for the first time in six months at a rate of -0.3 percent. This may lead the annual rate of growth, which is more closely watched by the Bank of England, is forecasted to fall to 1.5 percent, the lowest since November 2004, from 1.8 percent, keeping inflation within the central bank’s acceptable range of 1 percent - 3 percent, but below their 2 percent target. If CPI falls more than projected, the British pound could pull back sharply as the markets will anticipate that the BOE will expand their quantitative easing efforts even further before year-end. On the other hand, if CPI holds strong, the currency could rally in response.