The Federal Reserve is expected to maintain a hawkish tone during its first meeting of 2022 and confirm that interest rates will start to rise in March. 

The British pound eased below $1.35 during the fourth week of January, as investors digested PMI data showing Britain's private sector growth slowed to an 11-month low and as demand for the dollar was supported by expectations the Federal Reserve will be announcing this week a March interest-rate hike to combat inflation.

Elsewhere, investors see a high chance that the Bank of England will raise rates again next week, after data showed last week the UK consumer inflation rose more than expected to 5.4% in December, its highest since March 1992.