Pound Sterling struggles for direction as investors await BoE’s guidance on inflation and interest rates.

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• Pound Sterling struggles for direction as investors await BoE’s guidance on inflation and interest rates.
• The stubbornness of the UK inflation outlook has deepened amid robust spending by households.
• The market mood is slightly cautious ahead of the FOMC minutes.

The Pound Sterling (GBP) trades sideways in Tuesday’s European session as the market sentiment is slightly downbeat ahead of the release of the Federal Reserve Open Market Committee (FOMC) minutes, which will provide a fresh outlook on interest rates. In today’s session, Bank of England (BoE) Governor Andrew Bailey and other policymakers will testify before the United Kingdom Parliament to guide the outlook on inflation and interest rates.

Investors expect the maintenance of a hawkish line of rhetoric from Andrew Bailey and his teammates amid less conviction over the achievement of price stability in a sustainable manner. Robust wage growth, sticky service inflation, and solid households spending are indicating a stubborn inflation outlook, allowing the BoE to adopt a wait-and-watch approach before consideration of rate cuts. A hawkish guidance from BoE policymakers may improve the attractiveness of the Pound Sterling.

This week, the GBP/USD pair will be guided by the preliminary S&P Global Manufacturing and Services PMI for February, which will be published on Thursday.

Pound Sterling is stuck in a tight range below 1.2600 on Tuesday after indecisive closing in the last two trading sessions. The broader appeal is expected to remain uncertain as the 20 and 50-day Exponential Moving Averages (EMAs) are on the verge of delivering a bearish crossover. The psychological support at 1.2500 to remain a major support for the Pound Sterling bulls.

The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating a sharp volatility contraction.

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