The GBP/CAD has been in a tight range this week as investors focus on key inflation data from the UK and Canada. The GBP to CAD exchange rate is trading at 1.5877, which is slightly below last week’s high of 1.6035. It is still about 2.55% above the lowest level last week.
UK and Canada inflation data
The GBPCAD price is being driven by the recent decisions by the Bank of England (BOE) and Bank of Canada (BOC). The two banks have embraced a more hawkish tone in their battle against inflation. The BOE has already delivered five 0.25% rate hikes since December. The BOC, on the other hand, has done three hikes this year. The last one was a 0.50% hike.
The next key catalyst for the pound to CAD exchange rate will be the UK and Canada inflation data scheduled for Wednesday. Analysts polled by Reuters expect data from the UK to show that inflation surged to 9.1% in May as the cost of living soared.
Excluding the volatile food and energy prices, analysts expect that the country’s inflation dropped from 6.2% to 6.0%. The ongoing strike by rail workers will likely make the situation worse in the next few days.
In Canada, analysts expect the data to show that inflation rose from 6.8% to 7.4% while core inflation rose from 5.7% to 5.9%. Therefore, expectations are that the Bank of Canada will continue tightening in its bid to lower consumer and producer prices in the near term.
The GBP/CAD is also reacting to the ongoing pullback in crude oil prices. Brent is trading at $110, which is lower than this month’s high of $122. Oil prices are important for Canada since it is a major exporter.
The four-hour chart shows that the GBP/CAD pair has been in a tight range recently. This price action started when the pair moved above the important resistance level at 1.5775, which was the lowest level in May this year. It has now moved slightly above the 50-day moving average and formed a bullish flag and a falling wedge pattern.
Therefore, the outlook for the GBP to CAD pair is bullish, with the next key resistance level being at 1.600. A drop below the support at 1.5820 will invalidate the bullish view.