Chart of the day - GBPCAD (19.10.2022)

GBP took a hit this morning after the release of UK CPI inflation data for September. Data showed headline price growth in the United Kingdom accelerating from 9.9 to 10.1% YoY (exp. 10.0% YoY). While the beat was small, it still means that the current inflation rate in the UK matched a 40-year high reached in July. Core gauge also ticked higher and moved from 6.3 to 6.5% YoY (exp. 6.4% YoY). Such an outcome further strengthens the case for a big BoE rate hike at its next meeting (November 3, 2022). Currently, the market almost fully prices in a 100 basis point rate hike.

Traders will be offered one more interesting inflation reading today - Canadian CPI for September at 1:30 pm BST. In this case a deceleration is expected with headline gauge seen dropping from 7.0 to 6.8% YoY. Market prices in a 60 bp of tightening for BoC meeting on October 26, 2022. A higher-than-expected inflation rating, combined with BoC tendency to follow Fed, would boost odds for a 75 bp rate move.

Taking a look at GBPCAD chart at H1 interval, we can see that the pair pulled back to the lower limit of a short-term trading range today after release of UK CPI data. A 1.5500 level was tested but bulls managed to defend it. The pair recovered part of the losses but rebound struggles to gain traction. The pair is likely to get more volatile at 1:30 pm BST when Canadian data is released.

Source: xStation5