GBP/CAD cannot find a support line and continues to be in free fall on Wednesday. Everything was great for the sterling during the UK election, which saw Prime Minister Boris Johnson’s Conservative party winning a historic victory. However, the situation had changed when Johnson announced his intention to rule out any extension of the Brexit transition deadline, currently set for the end of December 2020.
The pair is currently trading at 1.7231, down 0.25% as of 10:29 AM UTC. Thus, the price has lost all of its election gains and is rapidly heading towards December’s lowest level touched at the beginning of the month, when the pair was rallying.
The inflation data couldn’t provide any support for the pound. Earlier today, the Office for National Statistics (ONS) said that inflation remained at a three-year low last month, below the Bank of England’s (BoE) 2% target.
Consumer prices index (CPI) rose at an annual rate of 1.5% in November, slightly above analysts’ expectations of a 1.4% increase. The BoE will meet next Thursday to decide the interest rate. While most economists expect no change, some suggest that we should expect a dovish stance despite Johnson’s win.
Ruth Gregory, an economist at consultancy firm Capital Economics, commented:
“With inflation well below target, little sign of underlying price pressures and GDP growth running below trend, an interest rate cut on Thursday shouldn’t be completely ruled out. Even so, coupled with yesterday’s robust labour market figures, the pressure on the (BoE) to cut interest rates at its meeting tomorrow appears to have eased somewhat.”
ONS data showed that price increases for chocolate, package holidays, and concert tickets were offset by declining hotel costs and a modest growth in cigarette prices.
The core CPI, which doesn’t include energy, fuel, alcohol and tobacco prices, was steady at 1.7% last month, in line with expectations.
In a separate report, the ONS said that house prices in October increased by an annual rate of 0.7%, which is the smallest growth in over seven years. In September, house prices rose 1.3%.
The pair might get volatile in a few hours, as Canada is set to release inflation data as well.