The UK has a busy data week, with January jobs figures due on Tuesday and inflation numbers on Wednesday. The jobs report is expected to show further cooling in the labour market and slower annual wage growth.
If these trends continue into the March data, a Bank of England rate cut next month becomes more likely. Inflation is expected to ease, with headline CPI forecast to edge lower due to airfare movements, softer food price pressures, and a fading effect from last year’s private school tax rise.
Uk Data And Rate Cut Expectations
Core services inflation is expected to change little. Political attention has reduced, but betting markets put the chance of Prime Minister Keir Starmer stepping down by the end of June at about 70%.
The pound is described as at risk of falling at times if Starmer’s position weakens. EUR/GBP is associated with a target level of 0.88.
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The upcoming UK data releases are likely to confirm a weakening economic picture. Last week’s jobs report on February 11, 2026, showed the unemployment rate edging up to 4.5%, while annual wage growth slowed to 3.8%, its lowest point since mid-2024. This, combined with last Wednesday’s inflation data showing headline CPI falling to 2.9%, supports the case for a slowing economy.
Sterling Outlook And Eur Gbp Target
These persistent trends of a cooling labour market and easing price pressures make a Bank of England rate cut in the coming months look increasingly likely. We saw a similar dynamic develop through the second half of 2025, where soft data steadily increased bets on monetary easing. The market is now pricing in a significant probability of a rate cut by the end of the next quarter, putting sustained pressure on the Pound.
Political noise is also a key factor weighing on Sterling. Prime Minister Keir Starmer’s public approval rating has fallen to a net -25 in recent YouGov polls amid ongoing public sector disputes and slow economic growth. Any fresh signs of instability surrounding his leadership will likely lead to further depreciation episodes for the currency.
Considering our dovish view on the Bank of England and these political vulnerabilities, we remain bullish on the EUR/GBP pair. The cross has recently broken above the 0.87 level that acted as major resistance throughout 2025. This suggests derivative strategies positioned for a move towards our target of 0.88 remain attractive.
