GBP/USD bears stay on top in US session, taking out 1.2200

• GBP/USD pressured ahead of key data events this week. 
• Bank of England Governor Andrew Bailey said inflation looks set to fall markedly this year as energy prices decrease.

GBP/USD was down 0.27% at 1.2194 after rising to its highest since mid-December to 1.2288 from a low of 1.2170 while traders await UK jobs and inflation data due later this week for clues on Bank of England (BoE) monetary policy plans. 

In recent trade, the Bank of England Governor Andrew Bailey said on Monday that inflation looks set to fall markedly this year as energy prices decrease.

However, he said that a shortage of workers in the labour market poses a "major risk" to this scenario.

"I think that going forwards the major risk to inflation coming down ... is the supply side - and in this country particularly, the question of the shrinkage of the labour force," Bailey told lawmakers on parliament's Treasury Committee.

Key UK data on tap

Meanwhile, Employment data will be released on Tuesday and inflation numbers on Wednesday. ''We look for another large decline in UK headline Consumer Price Index, largely due to an almost 5% m/m drop in petrol prices but also as retailers pushed through significant discounts in the month to rid themselves of high inventory levels,'' analysts at TD Securities said. ''While our forecast is quite a bit below the BoE's of 10.9% YoY, much of this gap is due to lower petrol prices rather than weaker underlying dynamics.''

As for the jobs data, the analysts say they ''look for an unchanged unemployment rate in the three months to November as the labour market continues to stay persistently tight. At the same time, we think both headline and ex-bonus wage growth accelerated yet again, despite high-frequency data softening further.''

Looking ahead to next month's meeting, a tenth consecutive hike is expected and the money markets are pricing in a 65% chance of a 50 basis point (bps) hike and a 35% chance of a 25 bps increase.

''Even if the BoE has good reason to step up a hawkish tone, there were various instances last year when this failed to boost GBP, given the backdrop of weak investment growth, low productivity and overhanging uncertainties about the UK’s post-Brexit relationship with the EU,'' analysts at Rabobank said.