The striking contrast between the Fed representatives, unanimously speaking about the need for aggressive monetary restrictions, and the Bank of England officials, keeping an ominous silence, is alarming. Markets do not know what to expect from the British regulator at the February 3 meeting. Futures contracts give out a 90% chance of a repo rate hike at the second consecutive MPC meeting, which hasn't happened since 2004. However, BoE has already proved that there are plenty of surprises.

BoE Governor Andrew Bailey and his colleagues actively discussed the possibility of raising the rate in November, but did not do it. On the eve of the Committee's December meeting, on the contrary, "dovish" comments prevailed, but the Bank of England, contrary to market expectations, decided on the first act of monetary restriction in the last three years.

There is another reason for BoE's silence. Its previous inflation forecasts were far from reality. Few times the Central Bank made such mistakes. In fact, consumer prices accelerated in December to 5.4%, the highest level in 30 years. This requires action from Bailey and his colleagues.

Dynamics of forecasted and actual inflation in Britain

Investors believe that in 2022 the repo rate will increase by 100 basis points, and by the spring of 2023 it will reach 1.5%. This is a slower trajectory than the Fed. CME derivatives forecast that the Fed will raise the federal funds rate at five FOMC meetings this year. The same opinion is shared by JP Morgan, and Bank of America is counting on 7 acts of monetary restriction at once. The different rates of tightening of the monetary policy of the U.S. and British Central Banks underlie the collapse of the GBPUSD. And only the BoE has the power to stop it. Reducing the balance can come to the rescue.

According to the current plans of the Bank of England, the curtailment of assets on the regulator's balance sheet may begin at a repo rate of 0.5%. This will most likely happen as early as March 3. According to Nomura, initially, it will be about stopping the reinvestment of income received from bonds that BoE acquired as part of the £895 billion quantitative easing program. The regulator will closely monitor the reaction of financial markets and, in fact, will become the first of the largest central banks to move from QE to QT - quantitative tightening. This is a kind of laboratory experiment, so the attention of investors to the MPC meeting is quite understandable.

So far, new potential drivers for the strengthening of the U.S. dollar in the form of a 50 basis points Fed rate hike in March or more monetary restrictions in 2022 than markets expect, allow the GBPUSD bears to dominate. But won't the Bank of England meeting be a game-changer?

Technically, if the pound bulls manage to cling to the fair value at 1.3415 and realize the inside bar formed at the auction on January 28, the risks of a rollback will increase. This may become the basis for short-term purchases of GBPUSD in the direction of 1.35-1.3525.

GBPUSD, Daily chart