Today, GBPCAD rose after the shocking news of UK inflation rising higher than expected, resulting in the failure of aggressive rate hikes to cool it down.
GBPCAD Daily chart
The exchange rate has now approached a significant resistance level near 1.6850, and traders should be vigilant for a possible breakout or reversal. While many analysts predicted the Bank of England to pause its interest rate meeting due to recent bank turmoil, this is unlikely as the price pressures are still evident. Canada has halted rate hikes after inflation slowed, but the UK interest rate hikes have not had the desired effect.
UK Interest Rate Hikes Fail to Cool Down Inflation
UK core inflation for February was 6.2% versus the 5.7% expected, and the headline number came in at 10.4%, with 9.9% expected. The BoE has hiked rates for ten consecutive meetings, despite the record high in the current cycle being 11.1%.
Since last year, goods and services have seen a significant increase in prices, with the official inflation rate being approximately 6% and 17.2% over the past two years.
The cost of food and non-alcoholic beverages has reached an almost 18% increase over the last year, the highest rate since August 1977, according to the ONS statistics office.
Powell Faces Criticism Over Regulation and Monetary Policy
Powell has faced criticism, with Senator Elizabeth Warren accusing the Chair of failing on regulation and monetary policy and suggesting that he should not hold his current role. The latest inflation report from the UK economy is expected to show a slip to 9.9%, which is still stubbornly high and worse than other developed economies.
Despite the crisis with Credit Suisse, the Bank of England is anticipated to ignore it and raise rates again at the upcoming meeting as the inflation rate remains close to double digits. However, traders must keep an eye on the price action at this resistance level, which may indicate a high for the British pound due to economic concerns arising from price increases.
