Pound Sterling Unsettled Ahead of a Busy Week of Agenda

The Monetary Policy Committee's (BoE's MPC) hearing with UK lawmakers today could affect the pound sterling, as well as a number of important data releases.

Pound sterling tends to be calm in trading earlier this week (15/November).

GBP/USD positions hold near last week's closing price at 1.3417 levels, while EUR/GBP circulates in a narrow range between 0.8526-0.8536.

There is so much on the agenda that could affect the pound sterling over the next week, so market participants are starting to be on high alert.

Sterling weakened in a row since mid-October, due to market disappointment with the British central bank (BoE) and the re-emergence of the UK-EU dispute.

GBP/USD only found support on Friday, after the release of US consumer sentiment data that triggered profit-taking on the USD.

Meanwhile, EUR/GBP has started to correct much earlier, as a number of European Union member countries have begun to impose partial lockdowns again to stem the rise in COVID-19 cases.

However, the existing catalysts are not sufficient to push the pound sterling to strengthen further.

Market participants will look forward to a number of key agenda items, including the Monetary Policy Committee's (BoE's MPC) hearing with UK MPs, the release of employment and inflation data, as well as the UK retail sales report.

Today's BoE MPC hearing will also be attended by BoE Governor Andrew Bailey.

British lawmakers on the occasion may urge him to provide clues about when the central bank will be ready to raise interest rates.

The release of UK employment data tomorrow is also very interesting, as Bailey has previously said that the central bank needs to look at employment data first before raising interest rates.

Most analysts are still optimistic about the pound sterling's bullish outlook, as the BoE is not expected to have much room to avoid a rate hike.

On the other hand, the issue of the UK-EU dispute tends to be sidelined because the British government does not necessarily have the courage to trigger article 16 of the Northern Ireland Protocol.

“Given the importance of the BoE tightening, we expect EUR/GBP to reverse back to 0.8500 by year-end. In the short term, we will be watching whether the pair will hold below the 200-Day Moving Average resistance at 0.8580 despite the escalating Brexit chaos,” said Francesco Pesole, strategist at ING.

"The bottom line is that the market still seems to expect the BoE to act against high inflation expectations and actual data, and is just waiting to see employment data released before the next MPC meeting on December 16 before pulling the trigger," said Shahab Jalinoos. , head of trading strategy at Credit Suisse.

The results of the September 2021 BoE meeting convinced the market that a rate hike would definitely be announced soon.

However, the November MPC voting results were in favor of the BoE interest rate remaining at 0.1 percent.

Market forecasts are now pegging the BoE rate hike in December, or February 2022.