The Pound Sterling (GBP) recovers swiftly as the Bank of England (BoE) has kept interest rates steady at 5.25%. The BoE has kept interest rates unchanged for the fourth time in a row. Six of nine Monetary Policy Committee (MPC) members supported maintaining the status quo. BoE policymakers Catherine Mann and Jonathan Haskel voted for a further interest rate hike by 25 basis points (bps) to 5.50%, while Swati Dhingra endorsed a rate cut of the same size. BoE Governor Andrew Bailey and his colleagues have emphasized keeping interest rates higher for longer until they get confident that inflation will return to the 2% target sustainably in the medium term. The longevity of higher interest rates depends upon the incoming data. The BoE says upside risks to geopolitical tensions, domestic price, and wage growth are more balanced.

Meanwhile, market sentiment is still volatile as the Federal Reserve (Fed) has cleared that it is in no rush to cut interest rates in March. Pound Sterling discovers strong buying interest near 1.2625 but remains inside the last three weeks’ trading range of 1.2640-1.2775. The GBP/USD demonstrates a sharp volatility contraction on a broader timeframe, which may be the precursor of an eventual decisive break after the policy announcement by the BoE.

On the daily timeframe, a descending triangle chart pattern is in formation, which indicates indecisiveness with a slight negative bias. The downward-sloping trendline of the aforementioned chart pattern is placed from 28 December 2023 high at 1.2827 while the horizontal support is plotted from 21 December 2023 low at 1.2612. A decisive break through these boundaries would confirm a stronger directional move higher or lower – the BoE meeting may provide the catalyst. The 14-period Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, which indicates that investors await a potential trigger for further action.