Bank of England (BoE) Governor Mark Carney will make his first public speech on Wednesday and analysts expect him to try and persuade businesses that interest rates will remain low for the foreseeable future in the face of growing skepticism over his policy of "forward guidance".
The Bank of England's "forward guidance" has sought to cap bond yields at the short-end. Instead, in recent weeks, gilt yields have climbed to multi-year highs and the pound has appreciated against the dollar as the U.K. economy has shown signs of improvement.
"Mark Carney will deliver his first public speech as BoE governor on Wednesday and is likely to emphasize the BoE's focus on maintaining accommodative monetary policy until unemployment falls below 7 percent. As such, we favor owning GBP/USD downside over this event," analysts at Barclays said in a research note on Monday.
(Read More: BoE split on forward guidance; unemployment steady)
Carney will speak at the East Midlands, Derbyshire and Nottinghamshire Chamber of Commerce and the East Midlands Institute of Directors on Wednesday at 1.45 p.m. with a press conference due shortly afterwards.
Carney announced on August 7 that the central bank will not raise interest rates until U.K. unemployment hits 7 percent. He also gave three other conditions or "knockouts" which would stop the BoE from changing rates: above-target inflation; unanchored medium-term inflation expectations and any threat to financial stability.
But markets have so far taken a dim view of the guidance. Interest rates on the 10-year benchmark government bond have climbed above 2.7 percent from 2.5 percent. Investors have turned more bullish on sterling, with the currency appreciating to 1.557 against the dollar from 1.534. The minutes of the MPC (Monetary Policy Committee) meeting added to Carney's woes, revealing that an external member - Martin Weale - dissented on the vote with fears that the Bank had gone soft on inflation.