Finance
Sterling nears one-month low as investors bet on BoE rate cuts
Published by Global Banking & Finance Review®
Posted on February 20, 2026
2 min readLast updated: February 20, 2026
Quick Summary
Sterling trades near a one‑month low as investors bet on BoE rate cuts. Strong retail sales and a larger budget surplus contrast with softer jobs, wage growth and easing inflation, keeping markets priced for near‑term easing.
Sterling edges toward one-month low as markets price in BoE cuts
By Sophie Kiderlin
Market Moves and Policy Expectations
LONDON, Feb 20 (Reuters) - The British pound hovered around its lowest in a month against the dollar on Friday, and was headed for its biggest weekly decline since January 2025, as investors weighed mixed economic data and added to bets on Bank of England interest rate cuts.
Sterling Levels and Weekly Decline
Sterling was last little changed at $1.3468, near Thursday's one-month low at $1.3435. For the week, the currency was headed for an around 1.3% decline.
Retail Sales and Budget Surplus
Investors were contending with mixed economic data after figures published Friday showed that retail sales volumes rose at the fastest annual pace in nearly four years in January. They jumped 4.5% compared to a year earlier, and 1.8% from the previous month, beating expectations.
Separate figures, also released Friday, showed Britain ran a larger-than-expected budget surplus in January.
Analyst View: Dominic Bunning
"I don't think we read too much into one retail sales print, although generally speaking, the consumption trend has been a bit better in the UK than we maybe would have expected," Dominic Bunning, head of G10 FX strategy at Nomura, said.
Labour Market and Wage Trends
Economic data published earlier in the week had also painted a weaker picture and added to dovish expectations for the Bank of England's monetary policy, with the UK's jobless rate picking up slightly in the fourth quarter of 2025 compared to the previous three months and wage growth slowing. Inflation meanwhile eased to its lowest in close to a year.
Friday's data does not "outweigh what we saw earlier in the week," Bunning said.
"The loosening in the labour market and the jump in unemployment, the still very clear downward trends in wage growth that are there - I would still make the case that this points towards the Bank of England continuing to ease over the next, you know, over the next few months," he said.
March Meeting Outlook
Rate-Cut Odds and Timing
Money markets were last pricing in a close to 80% chance of the BoE trimming interest rates by 25 basis points at its March meeting, with a further cut being expected later in the year.
(Reporting by Sophie Kiderlin; Editing by Toby Chopra)
Key Takeaways
- •Sterling hovers near a one‑month low as investors increase bets on BoE easing.
- •Robust January retail sales and a larger budget surplus offered mixed signals.
- •Earlier data showed softer labour markets and slowing wage growth.
- •Inflation eased to its lowest level in close to a year, reinforcing dovish expectations.
- •Money markets price a high probability of a 25 bps BoE cut in March, with more possible later.
Frequently Asked Questions about Sterling nears one-month low as investors bet on BoE rate cuts
1What is the main topic?
Sterling’s slide toward a one‑month low as traders increase bets that the Bank of England will cut interest rates soon.
2Why is the pound weaker despite strong retail sales?
Mixed signals: retail sales and a larger budget surplus beat forecasts, but softer labour data, slower wage growth and easing inflation bolster expectations for BoE rate cuts.
3What are markets expecting from the BoE?
Money markets are pricing a high chance of a 25 bps cut at the next meeting, with potential for additional easing later in the year.
