The Pound Sterling (GBP) surged in Friday’s late European session, driven by a positive outlook for the United Kingdom’s economy. The GBP/USD pair climbed towards Thursday’s high, reflecting improved market sentiment.
Investors are eagerly awaiting guidance on Bank of England (BoE) interest rates. Despite lingering uncertainty about the timing of potential rate cuts, there is growing anticipation that the central bank may reduce rates in the early part of the second half of the year.
The likelihood of a rate cut in the June policy meeting is currently below 50%, while a dovish decision in August seems increasingly likely. BoE Governor Andrew Bailey has indicated that price pressures are expected to ease to the 2% target in the spring before rising again. This could pave the way for the BoE to consider scaling back its historically restrictive monetary policy stance.
Meanwhile, the US Dollar has stabilized after a sharp recovery, driven by tightening labor market conditions. Initial jobless claims for the week ending February 16 came in lower than expected at 201K, compared to expectations of 218K and the previous reading of 213K. Federal Reserve (Fed) policymakers continue to stress the need for more evidence to confirm that inflation will decline to the 2% target.
Technical Analysis: Pound Sterling Rebounds to 1.2700
The Pound Sterling has approached the upper range of Thursday’s trading session, indicating a near-term sideways trend. The currency pair is oscillating within a Descending Triangle pattern on the daily timeframe, suggesting indecision among traders with a slightly negative bias due to the formation of lower highs.
The Descending Triangle pattern’s downward-sloping border is drawn from the high on December 28 at 1.2827, while the horizontal support is located near the low on December 13 near 1.2500.
The pair is currently trading above the 20 and 50-day Exponential Moving Averages (EMAs) around 1.2630. Additionally, the 14-period Relative Strength Index (RSI) is in the 40.00-60.00 range, indicating a sharp contraction in volatility.