GBP/USD faces a testing weekBritish Pound / U.S. DollarFOREXCOM:GBPUSDFOREXcomThe Federal Reserve meets on Wednesday, followed by the Bank of England takes on Thursday, with markets currently expecting policymakers to remain on hold while keeping future options open. The drop in energy prices have complicated the inflation outlook and may encourage investors to question whether further tightening will ultimately be required from both central banks. The BoE is likely to acknowledge improving inflation dynamics without encouraging markets to assume that rate increases are completely off the table. Any dovish shifts could paradoxically be beneficial for the pound, as hiking into a stagflationary environment is ultimately not good for the economy. Meanwhile, domestic politics may also attract attention this week, with the Labour by-election in Makerfield having the potential to intensify speculation surrounding the party’s future leadership direction. Continued consolidation is around the 200-day is likely for now, but watch for a break above 1.3483 or below 1.3325 to signal a shift in technical direction. By Fawad Razaqzada, market analyst with FOREX.com