The British pound rose approximately 1.2% against the US dollar in February 2026, trading near $1.29 on February 28, as a weaker dollar and improved global risk appetite outweighed subdued UK fundamentals. Cooling US inflation and slower consumer spending increased expectations for a more accommodative Federal Reserve, while equity markets reached record highs, supporting higher-yielding currencies. In an earlier US labor-market episode, sterling fell to 1.2650 from 1.2700 after initial jobless claims came in at 213,000, below the 220,000 forecast and the previous week's revised 215,000, reducing the perceived urgency for aggressive Fed easing; the dollar index rose 0.2% to 104.50 and September rate-cut odds fell to 70% from 75%. The UK economy remains fragile: GDP grew 0.1% in the fourth quarter of 2025 after contracting in the third quarter, while January 2026 CPI inflation eased to 3.4% but stayed above the Bank of England's 2% target. Markets price a 60% probability of a 25-basis-point March rate cut, with services inflation and wage growth above 5% complicating the decision. The March 11, 2026, Spring Budget and the Bank of England's policy decision are key tests for sterling's longer-term direction.