The British Pound surged to a fresh one-month high against the Canadian Dollar on Wednesday after the most recent UK CPI inflation data added to the case for more interest rate hikes by the Bank of England.

Annual headline consumer price inflation in the UK slowed to 6.8% in July, marking its lowest level since February 2022 and matching market expectations. CPI inflation stood at 7.9% in June.

Transport costs fell further in July as a result of a 24.9% drop in price of fuels and lubricants.

Services inflation, however, accelerated to 7.4% in July from 7.2% in the prior month.

Still, core CPI inflation, which does not take into account volatile categories such as energy and food, remained steady at 6.9% in July, while confounding expectations of a slowdown to 6.8%.

“Core inflation remains stubbornly high at 6.9% and is now slightly above the headline level,” Oliver Blackbourn, Multi Asset Portfolio Manager at Janus Henderson Investors, was quoted as saying by Reuters.

“This presents a headache for the Bank of England as it will want to see this less volatile measure decline to suggest that cost pressures are sustainably returning to target.”

The CPI numbers came out a day after separate data showed UK wages had risen at a record pace during the second quarter, which added to inflationary pressure.

Meanwhile, markets are now fully pricing a 25 basis point rate hike at the BoE’s policy meeting in September.

CAD traders now look to Canadian housing starts report for July, due out at 12:15 GMT today.

As of 9:07 GMT on Wednesday GBP/CAD was edging up 0.29% to trade at 1.7197. Earlier in the session, the minor Forex pair went up as high as 1.7206. The latter has been the pair’s strongest level since July 18th (1.7329).

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