Sterling ticked higher after searching for direction on Friday, but looked set to wrap up a holiday-thinned trading week lower against a dominating dollar.

The pound was up 0.17% against the greenback at $1.2546 after falling 0.17% earlier in the day. It has slipped 0.14% this week, falling for a third consecutive week against the dollar.

The pound has still managed to hold up against the U.S. dollar better than other major currencies this year, and is down 1.5% in the year to date after holding its own against the greenback for much of 2024.

The Bank of England has taken a slow pace with rate cuts this year, only reducing borrowing costs by half a percentage point, and this has underpinned much of sterling's strength.

Shifting expectations for more British rate cuts ahead has put pressure on the pound in recent weeks, while a hawkish Federal Reserve and a resilient U.S. economy have pushed up U.S. Treasury yields and boosted the dollar.

On average, traders price in 51.5 basis points (bps) worth of rate cuts next year from the BoE, compared to the 46 bps in cuts priced in before the central bank's policy meeting last week, when it held rates steady but was more split over the decision than markets had expected.

"UK wage growth and services inflation have remained notably stickier than elsewhere, despite signs of material labour market rebalancing. As a result, the BoE has been more cautious than other major central banks," said Goldman Sachs analysts in a note.

"We expect continued quarterly cuts through 2025 as a weaker labour market cools underlying inflation, more than currently priced."

Sterling was up 0.1% against the euro on the day, with one euro at 83.11 pence.

While the euro clawed back 0.2% this week against the pound, adjusting to dovish BoE signals, the common currency has lost about 4% this year, as the European Central Bank still looks set to take a faster rate-cut path than its British counterpart.

(Reporting by Greta Rosen Fondahn Editing by Gareth Jones)