GBP/USD holds in corrective territory ahead of key events later in the week

GBP/USD is flat on the session and has moved within a range of 1.3520 and 1.3539 on the session so far after it dipped under 1.3500 in European markets before returning to 1.3535 thereafter.  It's been one of those starts to the week where there is no momentum one way or the other as the markets digest the events of the prior week and await the next catalyst. 

The US dollar and the euro both eased and the pound was able to recover from the initial offer following a hawkish surprise from the European Central Bank last week and in US Nonfarm Payrolls. The ECB has left the door open for a rate hike later in 2022 should inflation risks rise. However, President Christine Lagarde calmed market expectations when she told a European Parliament hearing that there is no need for big monetary policy tightening in the eurozone. She said inflation is set to decline and could stabilize around the ECB's target of 2%.

Meanwhile, Friday's Nonfarm Payrolls data was showing an unexpected jump in US jobs created in January. This supported a bid in the greenback initially before it soon fizzled out into the close and moved sideways for the opening sessions of this week.

Looking ahead, the markets will turn to the US Consumer Price Index that is slated for Thursday. Domestically, UK Gross Domestic Product is on the cards as a potential catalyst for the pound. ''We look for UK GDP to contract 0.8% MoM in December, thus bringing GDP below its pre-COVID level once again,'' analysts at TD Securities said, 

''Manufacturing likely declined 0.3% MoM, while we expect the services sector to contract 0.9% MoM, in part driven by voluntary COVID measures and a substantial amount of people isolating due to the Omicron surge, but also due to a fade in consumer demand.''