UK consumer price index is also known as Harmonized Index of Consumer Prices (HICP). The UK consumer price index is considered as an official tool for measuring inflation of consumer prices in UK. It also indicates the prediction of monetary policy that is defined by Bank of England. The UK consumer price report is prepared by statistics unit of Bank of England and this annual report compares prices of different consumer products. Price of the basket of products selected for the preparation of UK consumer price report is compared with reference to last year in order to determine the inflation trend.
Trading the UK consumer Price report assists currency traders by providing opportunities to trade currency, keeping in view the perceived inflation rate. The currency traders analyze UK consumer price index and extract any possible opportunities out of this analysis. GBP and USD is the pair of currency that is very flexible to the outcomes of UK consumer price report.
This report is regarded as the most efficient predictor of inflation due to the fact that this report calculates deviation in prices of services and goods purchased by consumers, against some previous year. It is the direct responsibility of Bank of England to keep check and balance over the inflation in UK. During the fiscal year 2011 and 2012 the Bank of England is striving to keep the inflation rate at 2%. The UK core CPI is to some extent different from the simple UK CPI in terms of the fact that core CPI does not include the prices of volatile items, that is why most of the economist regard core CPI more effective than simple UK CPI.
The UK consumer price report has different possible impacts over the trading. A bullish stance for the trading of British currency will be followed by the traders if in case the expected CPI growth is more than the actual publications. In other case, the trader will hold long position over the trading of British currency, when the actual CPI figures reveal high figures as compare to the forecasted one. We can conclude that traders would take short position when the expected interest rate is not recording increase, whereas, the currency traders will adopt long position if there are expectations of increase in interest rate. As discussed earlier all sort of trading that took place under the umbrella of UK consumer price report is governed and monitored by the Bank of England.