Sterling traded around $1.36, remaining below its late-January high of $1.387, as investors looked ahead to a busy week of UK economic data, including inflation, labor market indicators, and retail sales. Headline inflation is forecast to slow to 3.0% in January, its lowest level since March 2025, while core inflation is expected to edge down to 3.1%, a more than four-year low. The unemployment rate is projected to hold at 5.1% in Q4, its highest since early 2021, with wage growth likely to ease further.
Recent figures showed the UK economy grew by just 0.1% in Q4 2025, capping a challenging year and intensifying political pressure on Prime Minister Keir Starmer. At the same time, markets continue to price in further monetary easing from the Bank of England. Although policymakers left interest rates unchanged at 3.75% in a split decision, they struck a more dovish tone, suggesting inflation is likely to move closer to the 2% target from April onward.
