The pound remained range-bound against the loonie yesterday following the release of better-than-anticipated economic data from both the UK and Canada. Notably, the inflation in both countries has hit a four-decade high as per the latest economic data. Overall, the GBP/CAD pair traded between 1.5800 and 1.5925 in the last 24 hours.
According to the ONS, the UK’s consumer prices index (CPI) grew by 9.10% y-o-y in May 2022, up from 9% in the previous month and in line with economists’ estimates. The reported figure reflects the highest level since 1982.
Housing and utilities recorded a surge of 19.40% y-o-y in May 2022. Likewise, transport posted a rise of 13.80%. Food and non-alcoholic beverages increased 8.60%. Furniture and household goods saw an increase of 10.50%. Restaurants and hotels recorded a softer price rise of 7.60%. Similarly, recreation and culture posted an increase of 5%. While the health care sector witnessed an increase of 1.80%, clothing and footwear reported a growth of 7%. Inflation remained steady for education at 4.50%. Also, inflation in the communication sector remained almost unaltered at 2.80%.
On an m-o-m basis, the CPI increased 0.70% in May, versus forecasts of 0.60%, and less than the 2.50% rise recorded in April. In the same period last year, the CPI rose by 0.60% on an m-o-m basis.
The ONS also stated that core CPI, which excludes volatile goods such as food and fuel, rose by 5.90% y-o-y in May, slightly down from 6.20% in the earlier month. The reported figure was a notch lower than the 6% growth anticipated by economists.
According to the data published by Statistics Canada, the country’s consumer prices index (CPI) increased 1.40% m-o-m in May, following a rise of 0.60% in the prior month, and greater than the 1% growth anticipated by economists.
On a y-o-y basis, Canada’s CPI surged to 7.70% in May 2022, the highest level since January 1983, and higher than market forecasts of 7.40%. The increase was led by transportation, shelter, and food against the backdrop of Western sanctions on Russia and the ongoing Ukraine-Russia conflict that fueled the prices of energy and commodities.
Transportation expenses jumped 14.60% y-o-y in May, driven by a 48% surge in gasoline costs. During the same period, shelter prices remained unaltered from the prior month’s level of 7.40% as mortgages continue to rise. In the meantime, food prices remained unchanged from the earlier month at 8.80%, in spite of a 9.70% rise in groceries prices.
Excluding gasoline, the CPI grew by 6.30%.
On an m-o-m basis, core CPI increased 0.80% in May, following a rise of 0.70% in April.
The robust inflation rate in both countries is expected to keep the GBP/CAD pair range-bound in the short term.
The historical price chart indicates that the GBP/CAD pair is rising after testing the support at 1.5880. The next resistance is anticipated only near 1.6120. Additionally, the currency pair is trading above its 50-day moving average, while the MACD indicator has a positive reading. Therefore, we are anticipating the currency pair to remain in an uptrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
