GBP/USD: Pound Sterling (GBP) trades within a narrow range on Tuesday

Pound Sterling (GBP) trades within a narrow range on Tuesday as traders await fresh catalysts to provide clearer direction on the timing of potential Bank of England (BoE) interest rate cuts. GBP/USD is consolidating, with upside limited by expectations of eventual BoE rate cuts, while a softer US Dollar prevents further downside.

The US Dollar Index, currently at 103.70, faces pressure amid renewed hopes for a ceasefire between Israel and Palestine, supporting riskier assets like the GBP. This week, key US economic data, including Durable Goods Orders and the core Personal Consumption Expenditure (PCE) price index for January, will significantly influence the US Dollar. A sharp decline in US core PCE inflation could bolster expectations for early Federal Reserve (Fed) rate cuts.

With a light UK economic calendar this week, Pound Sterling’s near-term direction remains uncertain. Technically, the pair remains within Monday’s trading range, approaching the lower boundary of a Descending Triangle pattern (formed on the daily timeframe). Horizontal support remains near the December 13 low of 1.2500. While GBP/USD holds above the 20 and 50-day Exponential Moving Averages (EMAs) at approximately 1.2630, the 14-period Relative Strength Index (RSI) approaches 60.00. A sustained move above the RSI 60.00 level could trigger bullish momentum.