Monthly Currency Report Summary – February 2026

Overview

February was a steady reset after the sharp moves seen in late January. Markets became more sensitive to interest rate expectations and less driven by single data surprises. Traders focused on whether the Federal Reserve would delay cuts because inflation remained stubborn, and whether the Bank of England would be pushed toward earlier easing as the UK labour market softened. Tariff headlines and political uncertainty in the US also influenced risk appetite and short-term flows.

The US Dollar spent the month trying to stabilise. It found support when investors judged that Fed cuts were less likely in the near term, but that support was often interrupted by renewed uncertainty around tariffs and policy direction. Overall, the Dollar’s tone improved versus January, but it was not consistent.

Sterling was weaker than it had been at the end of January. The key drag was rising confidence that UK rates could be cut sooner than previously expected. When UK labour market data disappointed, it fed that view and reduced demand for GBP. Sterling recovered at times when the Dollar softened, but gains tended to fade.

The Euro held up relatively well. EUR/USD did fall for much of the month, but the decline was generally controlled and supported around key levels. Later in the month, renewed US uncertainty helped the Euro recover some ground.

Against this backdrop, GBP/EUR remained range-bound. It spent long periods near 1.1450, with neither side able to build a lasting advantage. Cross-market moves in GBP/USD and EUR/USD mattered more than domestic UK or Eurozone data for most of the month.

GBP/USD

GBP/USD weakened through February as the market moved away from the most USD-negative view that dominated late January. Traders increasingly questioned whether the Fed would be able to cut rates as quickly as markets had hoped, because US inflation was still described as persistent. That shift helped the Dollar regain some support and removed a key driver behind Sterling’s earlier strength.

At the same time, the UK outlook became more of a constraint. Softer labour market signals increased the belief that the Bank of England may start easing sooner, which reduced the appeal of holding GBP. Even when UK inflation data arrived broadly in line with expectations, it did not deliver a strong boost because traders were focused on what it meant for future BoE decisions rather than the print itself.

Sterling did attempt to recover at points, but these rallies were frequently met with profit-taking or a return of USD demand. The overall tone was that GBP/USD struggled to build momentum above the mid-1.36 area once the market started to reprice the path of US rates and take a more cautious view on UK growth and employment.

By late month, Cable was trading closer to the mid-1.34s. There were signs of stabilisation when tariff uncertainty and legal headlines in the US increased doubt around the Dollar, but the month ended without a clear trend reversal. The balance of risks remained two-sided: Sterling can benefit if the Dollar weakens again, but it is harder for GBP to sustain gains if markets keep expecting earlier BoE cuts.

EUR/USD

EUR/USD spent much of February drifting lower as the Dollar regained some composure. The main driver was the same as in GBP/USD: markets leaned toward the view that the Fed might keep policy tighter for longer than previously priced, because inflation was proving stubborn. That supported the Dollar and limited how far EUR/USD could push higher.

Despite this, the Euro’s downside was usually contained. The pair repeatedly found support around the 1.1800 to 1.1750 area, and selling pressure often slowed near those levels. Market commentary also suggested downside momentum was not accelerating, which encouraged consolidation rather than a sharp extension lower.

ECB-related narratives and European sentiment data helped steady the Euro at times, but the broader driver remained USD direction. When the US outlook looked steadier, EUR/USD struggled. When US uncertainty returned, particularly around tariffs, the Euro improved.

Late in the month, EUR/USD recovered after ending a long losing run. The recovery appeared to be driven more by renewed doubt around the US policy backdrop than by a sudden improvement in Eurozone fundamentals. The key point for February was that EUR/USD remained closely tied to shifts in Fed expectations and US risk sentiment.

GBP/EUR

GBP/EUR was mostly range-bound in February and spent long stretches near 1.1450. The pair did not develop a lasting trend because the drivers were often offsetting. Sterling was pressured by expectations of earlier BoE cuts, while the Euro benefited from relatively steadier policy expectations and moments of resilience in EUR/USD.

When GBP/EUR tried to lift, it tended to stall in the mid-1.14s to low-1.15s. Progress usually required GBP/USD to outperform EUR/USD, and that did not happen consistently. On the downside, moves were often slowed by the fact that the pair already looked stretched at times, which encouraged short-term buying and limited follow-through selling.

Overall, GBP/EUR movements were heavily shaped by cross-market flows. If EUR/USD held up better than GBP/USD, the cross tended to remain soft. If Sterling briefly improved versus the Dollar while the Euro stayed steady, GBP/EUR could attempt a rebound, but these moves were rarely sustained.

By the end of February, the cross still looked trapped in a familiar range, with traders waiting for clearer direction from central banks and early March data.

Outlook

February ended with markets still focused on interest rate expectations and risk sentiment rather than single data releases. For GBP/USD, the next move depends on whether US inflation keeps the Fed cautious and whether UK data continues to increase the chance of earlier BoE cuts. For EUR/USD, the Euro remains sensitive to changes in USD confidence, particularly around tariffs and Fed expectations. For GBP/EUR, direction is likely to remain limited unless one of the two major pairs moves more decisively than the other.

Early March data and central bank communication should determine whether February’s range trading continues or gives way to a clearer trend