GBP/USD fell 1% on Monday nL1N2Y00OZ, leading major currencies lower after surprisingly weak UK GDP and output data and setting up a potential test of its 2022 lows and possibly its pandemic troughs as investors expect Fed and BoE meetings this week to exacerbate widening interest rate differentials.

With investors raising terminal Fed rate expectations 0#ED: after Friday's surprisingly strong U.S. inflation, sterling is struggling against the dollar and other currencies of central bank seen more aggressive on inflation fighting than the BoE.

Thursday's BoE meeting and presser will provide the latest guidance on near-term rates to add detail to investors' views.

GBPOIS, as indicated on BOEWATCH on Eikon, is showing a 50% chance of a 50bp BoE hike at Thursday's meeting, but even a half-point move might be insufficient GBP/USD bulls as futures indicate the Fed could consider raising borrowing costs in even bigger increments.

GBP/USD support, ahead of 2-year and 2022 lows by 1.2156, may be short-lived should U.S.-UK rates diverge further.
Below 1.2156, the late May 2020 low by 1.2050 will be targeted, then early-COVID, March 2020, lows by 1.14.

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