Following comments from Bank of England policy setter Vlieghe over the weekend, markets are beginning to turn their attention back to the economic data in anticipating whether the central bank will embark on a 25 basis point cut on January 30th.

This morning’s economic data is the first piece of information MPC members have had, helping discussions on a rate cut as in November, the economy contracted at its fastest annualised month-on-month pace since June 2012.

The path of data this week and prior to the Bank of England next monetary policy meeting at the end of the month is key. Policy maker Vlieghe, who previously outlined the bank’s first rate hike in a decade back in 2017 with a hawkish speech just two months prior, has triggered renewed concern on the state of the UK’s economy.

Fixed income markets have been complacent in pricing any action by the Bank of England thus far, but this weekend’s commentary has reignited price action with OIS markets predicting a 50.7% probability of a 25 basis point cut in January.

The heightened probability of a dovish rate adjustment has also translated into further selling pressure on sterling, with GBPUSD back under the $1.30 level for the first time this year.

Without any substantial turnaround in the economic data, which may come this week with the release of inflation and retail sales reports, sterling is unlikely to rear its head above a key psychological level as the bearish bias begins to bite.