The British pound rose approximately 1.2% against the US dollar in February 2026, trading near $1.29 on Feb. 28. The advance was driven mainly by a weaker dollar as markets increased bets on a more accommodative Federal Reserve after US inflation cooled and consumer spending slowed modestly, rather than by stronger UK fundamentals. Global risk appetite also improved as equity markets reached record highs, supporting higher-yielding currencies such as sterling. The UK economy remains subdued: GDP grew 0.1% in the fourth quarter of 2025 after contracting in the third quarter, while CPI inflation fell to 3.4% in January 2026 but remained above the Bank of England's 2% target. Markets price a 60% probability of a 25-basis-point rate cut by the Monetary Policy Committee at its March meeting, although services inflation and wage growth above 5% complicate the decision. Businesses continue to face weak confidence, high borrowing costs and limited demand, while households remain under pressure from elevated energy and food prices. The March 11, 2026, Spring Budget and the Bank of England's policy decision are key tests for sterling's longer-term direction.