GBP/USD consolidates in a range around 1.3900 mark ahead of BoE decision

The GBP/USD pair extended its sideways consolidative price action through the first half of the European session and remained confined in a range around the 1.3900 mark.

The pair struggled to capitalize on this week's solid rebound from the 1.3800 level, or the lowest level April 16 and has been oscillating in a range for the second straight session on Thursday. Investors now seemed reluctant to place any aggressive bets, rather preferred to move on the sidelines ahead of Thursday's key event risks – the Bank of England monetary policy decision and the Scottish parliament election.

The BoE is widely expected to maintain the status quo at the conclusion of the May meeting. The decision will be accompanied by updated economic projections, which might infuse some volatility around the British pound. Meanwhile, the outcome of the Scottish election is seen as a referendum on the country's independence from the UK, which will further play a key role in driving the sterling in the near term.

The downside, however, remains cushioned, at least for the time being, amid some follow-through US dollar pullback from two-week tops. Wednesday's rather unimpressive US macro data reaffirmed market expectations that the Fed will keep interest rates low for a longer period. This, along with the underlying bullish sentiment in the financial market, acted as a headwind for the safe-haven greenback.

This makes it prudent to wait for a sustained break through the narrow trading band before traders start positioning for the next leg of a directional move for the GBP/USD pair.

Technical levels to watch