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Talking Points:

• British Pound may rebound as spotlight turns from Brexit to BOE policy bets

• US Dollar to face limited downside risk on soft Consumer Confidence report

• Yen gains as Japanese stocks fall in Asian trade, boosting anti-risk currency

The outlook for Bank of England monetary policy is in focus as Governor Mark Carney, Deputy Governor Minouche Shafik as well as MPC members Gertjan Vlieghe and Martin Weale testify before Parliament’s Treasury Select Committee. The likely impact of the UK’s exit from the European Union is also likely to be discussed after London Mayor Boris Johnson’s pro-Brexit stance amplified fears of such an outcome.

BOE interest rate hike expectations have been deteriorating for some months now. The likelihood of an increase in 2016 has vanished from the priced-in forecast implied in OIS rates, with traders now seeing a 40 percent probability of a 25bps cut within 12 months.

This means that surprising investors on the dovish side of the spectrum ought to be relatively difficult. Alternatively, even very modestly upbeat rhetoric suggesting the Bank still sees the potential for stimulus withdrawal this year would clash sharply with the established status quo and could send the British Pound sharply higher.

On the issue on Brexit, Mr. Carney and company are likely to obfuscate rather than explicitly weigh on a politically charged topic. Officials’ comments will probably stress that the BOE will draw up multiple scenario plans to promote a return to on-target inflation regardless of UK voters’ ultimate decision on EU membership.

Later in the day, the spotlight turns to February’s US Consumer Confidence data. The report’s internals ought to prove most interesting, with the inflation outlook of particular interest after yesterday’s manufacturing PMI survey hinted that factory-gate prices fell at the fastest pace since June 2012.

A similarly disappointing tone this time around may reinforce the recent dovish shift in the priced-in Fed policy view. Such an outcome’s ability to materially hurt the US Dollar may be limited however considering traders no longer expect further tightening in 2016, making it comparatively difficult to produce a dovish surprise.

The Yen outperformed in overnight trade, rising amid liquidation of carry trades funded in terms of the perennially low-yielding currency as Japan’s benchmark Nikkei 225 stock index declined. A clear-cut catalyst for the move is not readily apparent, suggesting the risk-off mood may be corrective following the largest rally in a week in yesterday’s session.