Pound Sterling trades in a narrow range as investors await fresh guidance on BoE interest-rate outlook.

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• Pound Sterling trades in a narrow range as investors await fresh guidance on BoE interest-rate outlook.
• The UK business optimism improves amid imminent hopes for BoE pivoting to rate cuts.
• The US Dollar clings to gains amid Middle East tensions.

The Pound Sterling (GBP) struggles for direction on Friday as investors await fresh guidance on Bank of England (BoE) interest rates. The GBP/USD pair trades sideways due to a quiet market of subdued sentiment. Market expectations for BoE’s rate cuts will guide further action in the Pound Sterling.

While uncertainty over the timing of BoE rate cuts continues to persist, investors hope that the central bank could reduce interest rates in the early part of the second-half of this year. The chances for a rate cut in the June policy meeting are under 50%, while a dovish decision for August seems inevitable.

BoE Governor Andrew Bailey said price pressures are expected to come down to the 2% target in spring before picking up again. This may allow the BoE to consider heavily unwinding its historically restrictive monetary policy stance.

Meanwhile, the US Dollar turns sideways after a v-shape recovery amid tightening labor market conditions. For the week ending February 16, individuals claiming jobless benefits for the first time were lower at 201K, against expectations of 218K and the prior reading of 213K. Also, Federal Reserve (Fed) policymakers reiterate the need for more evidence to confirm that inflation will decline to the 2% target.

Pound Sterling trades back and forth in a tight range around 1.2660. The GBP/USD pair hovers inside Thursday’s trading range. The near-term trend is sideways as the pair oscillates in the Descending Triangle pattern formed on a daily timeframe. The aforementioned chart pattern indicates indecisiveness among market participants, carrying a slightly negative bias due to its formation of lower highs.

The downward-sloping border of the Descending Triangle pattern is plotted from December 28 high at 1.2827, while the horizontal support is placed from December 13 low near 1.2500. The pair holds above the 20 and 50-day Exponential Moving Averages (EMAs), which trade around 1.2630. Meanwhile, the 14-period Relative Strength Index (RSI) trades in the 40.00-60.00 region, indicating a sharp contraction in volatility.

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