The Pound Sterling (GBP) drops as investors turn cautious ahead of a busy week. The GBP/USD pair falls gradually ahead of the interest rate decisions by the Bank of England (BoE) and the Federal Reserve (Fed), which are expected to leave rates unchanged for the fourth time in a row.

While the BoE is expected to hold steady, guidance on the interest rate outlook will be the key factor for further action in the Pound Sterling. The BoE is in a balancing act between vulnerable economic conditions in the domestic and overseas markets and stubborn price pressures. The maintenance of higher interest rates for a longer period by the BoE could dampen the labor market and demand conditions while a dovish signal will ramp up price pressures again. The market mood seems broadly cautious due to Middle East tensions and the Fed’s monetary policy announcement. Investors will keenly watch whether the Fed will choose the March or May meeting for the first rate cut after a prolonged “rate-tightening” campaign.

The Pound Sterling witnesses significant offers near the crucial resistance of 1.2700 ahead of crucial economic events. On a daily time frame, the GBP/USD pair demonstrates a Descending Triangle chart pattern formation, which indicates a sharp volatility contraction but with an upside bias. The downward-sloping trendline of the aforementioned chart pattern is drawn from 28 December 2023 high at 1.2827 while the horizontal support is plotted from 21 December 2023 low at 1.2612. The 14-period Relative Strength Index (RSI) oscillates in the 40-60 range, which indicates a sideways performance ahead.