Sterling faces a pivotal week as UK inflation and jobs data collide with shifting global rate expectations. With Bank of England and Federal Reserve policy outlooks evolving, FX markets remain highly sensitive to incoming data, and volatility could quickly follow.
Key Highlight
- The Pound comes under scrutiny with upcoming inflation and employment data
- US PCE figures and GDP releases shape the outlook for Federal Reserve policy
Market Recap
Currency markets moved in response to changing interest rate expectations and fresh political developments.
Sterling gained initial momentum after senior government figures publicly expressed support for Prime Minister Keir Starmer, helping to ease immediate political uncertainty and reduce the UK risk premium priced into GBP.
At the same time, the US Dollar began the week on softer footing. Disappointing retail sales data and cautious remarks from White House economic adviser Kevin Hassett increased speculation that the upcoming US payroll report could undershoot expectations.
However, sentiment shifted midweek. A stronger-than-anticipated US employment report briefly revived the Dollar and pushed expectations for the first Federal Reserve rate cut from June to July. That rebound proved short-lived, as rising jobless claims and slightly softer headline inflation in Friday’s CPI data tempered the move.
Market Overview:
🇬🇧 United Kingdom – Sterling in the Spotlight
UK data takes centre stage this week, with labour market figures due Tuesday followed by inflation data on Wednesday.
January’s headline CPI is expected to cool slightly, while wage growth and employment figures may point to some easing in labour market tightness. If confirmed, this would reinforce the Bank of England’s cautious stance and support market expectations for two interest rate cuts this year.
What this means for GBP:
Sterling remains highly reactive to domestic data. Softer readings could extend downside pressure, particularly after last week’s fragile sentiment. Conversely, any upside surprises in wages or inflation may prompt a sharp rebound. Political developments also remain an important risk factor for the Pound.
🇪🇺 Eurozone – Growth & Inflation Signals
Attention turns to final CPI figures from France and Germany, alongside flash PMI surveys.
Business activity data will be closely watched to assess whether the bloc is coping with external pressures and recent currency strength. Updated wage indicators from the European Central Bank will also help gauge whether domestic inflation pressures are easing.
🇺🇸 United States – Key Drivers for Fed Policy
The US schedule is packed, including weekly jobless claims, PMI surveys, fourth-quarter GDP and — most importantly — Core PCE inflation.
Core PCE and GDP will likely carry the greatest weight for interest rate expectations, shaping the outlook for the Federal Reserve. Meanwhile, claims data and regional surveys will offer early insight into labour market and business momentum.
🇦🇺 Australia – AUD Strength Continues
Stronger-than-expected employment figures in Australia have reinforced expectations of a more hawkish rate path, supporting the Australian Dollar.
GBP/AUD has already fallen approximately 2.5% this month, reflecting widening policy divergence.
Overall Market Implications
Sterling is likely to remain the most data-sensitive major currency this week. US releases will determine whether rate-cut expectations shift further, while Eurozone indicators provide a broader view of regional resilience.
As always, volatility around data releases could present both risk and opportunity for those with upcoming currency requirements.
16th February 2026
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