GBP/USD a critical watch on BoE and Fed week

It is a critical week for GBP/USD traders as we have both the Bank of England and the Federal Reserve central bank meetings. At the time of writing, GBP/USD is moving sideways in a consolidated market, hugging a bullish 200 EMA channel, albeit pressured by a firm US dollar as investors survey the conditions of the market's risk profile. 

GBP/USD hit fresh lows on Friday as some investment banks brought forward their forecast for a Bank of England rate rise. The general consensus is that while the BoE's rate-setters could be seen to be on the verge to vote for an early end to their COVID-19 stimulus plans, they are likely to hold off for now.

''Inflation is higher and the labour market tighter than the MPC expected in its August MPR,'' analysts at TD Securities explained.

''While we don't look for a change in policy itself (or even much of a change in the outlook), the MPC (with two new members) will find it hard to ignore these developments. A constructive tone is therefore likely, reinforcing market expectations of a 2022 hike.''

US dollar on firmer grounds ahead of Fed

Meanwhile, the US dollar climbed to three-week peaks on Friday, still benefiting from better-than-expected US Retail Sales data released on Thursday. the data lifted prospects of a hawkish tilt at this week's Fed meeting and it is expected that officials will likely signal that they are almost ready to taper.

''We expect a formal announcement in Dec, not Nov, but will reassess after the meeting,'' the analysts at TD Securities said. 'While median 2022-23 dot-plot projections will likely be unchanged, the math makes any changes more likely to be up than down. Median inflation/growth projections for 2021 will have to be raised/cut.''

GBP/USD technical analysis

• GBP/USD Price Analysis: Sellers seek validation below 61.8% Fibonacci near 1.3720