GBP/USD traders get set for the Bank of England

• GBP/USD traders get set for the BoE as the main evet. 
• US dollar stays pressured, helping the cable bulls along. 

It is a big day for sterling traders with the Bank of England that is expected to lift rates by another 25bps to 0.50% in order to combat ongoing inflation risks.

To this end, the pound has been performing well in its own right but also riding the coattails of US dollar weakness. At 1.3566, cable is flat and consolidating ahead of what could be a rollercoaster ride in European financial markets today. 

First and foremost, the US dollar has been on shaky grounds this week so far. As measured by the DXY index against a basket of rival currencies, the greenback has lost 1.68% so far since the opening of forex markets this week.  

Federal Reserve officials have been backtracking on some of the central bank's earlier hawkish comments, pushing the US dollar into the ground. Even the most renowned hawk, St. Louis Fed President James Bullard, pushed back against a larger rate hike in March.

In late New York afternoon trading on Wednesday, US rate futures priced in about 4.7 hikes this year, or 118.6 basis points of policy tightening, down from the five rate increases seen over the last two days, Reuters reported.

''Futures also showed the probability of a 50-basis-point hike in March has settled at 12.5%, from as high as 32% late last week.''

Meanwhile, one of the greenback's major props was pulled from under its feet when what is often regarded as a prelude to the Nonfarm Payrolls report arrived as a major disappointment on Wednesday. The ADP report fell for the first time in a year in January as soaring COVID-19 infections disrupted business operations.

The data arrived with a decline of 301,000 jobs last month. this was a far cry from the 207,000 in private payrolls expected. Additionally, December was revised lower to show only 776,000 jobs added instead of the initially reported 807,000. 

BoE is the ticket

Focus shifts to the BoE meeting. ''We expect the BOE to deliver a 25bp hike, and potentially signal the case for consecutive hikes going forward,'' analysts at TD Securities said.

''Given positioning and price action, we think a buy the rumour sell the fact playbook is likely.''

''We think the profile skews more negatively for GBP on the day, especially as positioning looks relatively long. That said, external drivers, like risk and the USD, feature prominently in the price action.''