2026.02.1807:31:59UTC+00Pound Holds Below $1.36 on Cooling Inflation

The British pound slipped below $1.36 as investors digested fresh inflation figures and their implications for the Bank of England’s policy outlook. Data from the Office for National Statistics showed UK inflation slowed to 3.0% in January, its lowest level since March 2025, driven largely by weaker growth in transport and food prices. Core inflation also moderated, easing to 3.1%—the lowest reading since August 2021.

The release followed a softer-than-expected labor market report on Tuesday. Average weekly earnings, including bonuses, rose 4.2% in the three months to December, the weakest pace since the period to August 2024 and below economists’ forecasts, while the unemployment rate increased to 5.2%, its highest level since early 2021.

In turn, traders have ramped up expectations for monetary easing. Markets are now fully pricing in a 25-basis-point rate cut by April, with a 76% probability of a move as soon as March. Two rate reductions are also fully priced in by November.