Pound Sterling (GBP) is drifting from last week’s highs toward 1.33 support, with domestic risk limited until Friday’s data releases, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

BoE commentary turns slightly hawkish ahead of data

"The pound has also been trading within a tight range, albeit with a slightly more defensive bias and a gentle bearish drift from last week’s highs in the upper 1.33s to current support around 1.33. Domestic risk remains limited ahead of Friday’s trade and industrial production figures, and the latest comments from the BoE have leaned somewhat hawkish, balancing dovish communication earlier this week."

"MPC member Lombardelli has expressed concerns about upside risks to inflation and reiterated prior BoE comments on the inflationary impact of capacity constraints. The BoE’s next meeting is on Thursday, December 18 and markets are pricing a 92% chance of a 25bpt cut."

"However, media appear to be throwing cold water on the assumption that a cut will be delivered, and major banks also appear to be lifting their terminal rate, nudging up their forecast for the BoE’s rate path."