By Gary Howes

Analysts continue to back the British pound against the US dollar on the foreign exchange rate markets. Event risk from the Bank of England lies ahead however.

The Bank of England are due to deliver their policy decision at mid-day in London. This will likely impact the GBP/USD should any surprises be announced. Follow today's live coverage for latest updates.

Ahead of the decision we see the pound to US dollar exchange rate (GBP/USD) trading 0.06 pct in the blue at 1.6454, analysts continue to forecast further gains for the exchange rate.

(Note: The above quotes are taken from the wholesale spot markets. Your bank will charge a spread on the rate at their discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you up to 5% more currency. Please learn more here.)

Pound dollar exchange rate forecasted higher

The bias for the pairing remains positive, but while the underlying tone in GBP/USD is positive, we may see consolidation in the near-term:

"The first visible cap is expected towards 1.6500 while initial support is seen around 1.6345. As noted previously, background chatter that the central bank may strengthen the dovish undertones of its forward guidance may keep the pair reluctant on the upside for now," says Emmanuel Ng at OCBC.

We note that the majority of currency market commentators we follow are bullish on sterling's prospects against the US dollar despite an increasingly pro-USD sentiment emerging.

Analysts at Citigroup are forecasting higher GBP/USD rates in the medium-term:

"GBP outperformed as the upbeat U.K. economy prospects continued to support the pound. GBP Outlook: The strong economic growth and high housing price will likely support the pound in medium term. Technically, GBP/USD may rise to 1.6603, with support at 1.6261."

Analyst Ipek Ozkardeskaya at Swissquote Bank reckons GBP/USD is due to challenge fresh highs:

"The Cable rebounded from 1.6377 yesterday – a stone’s throw higher than the up-trending triangle’s (from May 2013) lower band. GBPUSD extended gains to 1.6479 early in Europe. Technically, the fibo level of 1.6426/30 (fibo 23.6% on Nov 13’ – Jan 14’ rally) is now broken on the upside.

"Should the support hold at this level, we see GBPUSD to challenge fresh highs. December 31st CFTC data confirms the improved sentiment in British pound. The speculative (non-commercial) net GBP-long future positions climbed to highest since January 2013."

Bank of England risk ahead

Despite the underlying bullish trend momentum in the GBP/USD exchange rate caution is urged ahead of today's Bank of England decision.

There has been speculation in the press, and amongst some commentators we follow, that the Bank may choose today to alter its forward guidance policy.

Forward guidance is aimed at keeping interest rates low for as long as possible.

The Bank has chosen to target an unemployment rate at 7% before considering raising rates.

With UK unemployment falling faster than expected some analysts are predicting a rate hike as early as this year.

The Bank would be unhappy with such an early move so some reckon they may shift the goal posts - perhaps moving the unemployment threshold lower.

This would be a negative scenario for the pound dollar exchange rate.

By the same token, we would expect a completely neutral outcome today to be GBP/USD positive.

Stay tuned.