Global currency markets entered the final stretch of February adjusting to softer inflation data, mixed growth signals, and renewed debate over the timing of central bank rate cuts. Last week’s economic releases shifted expectations around monetary policy, particularly in the United States and the United Kingdom, while flash business activity surveys added nuance to the global growth picture.

KEY TAKEAWAYS

• Softer U.S. and UK inflation data reshaped short-term interest rate expectations.
• U.S. GDP showed slower fourth-quarter growth, while February flash PMIs signaled uneven global momentum.
• This week’s focus shifts to U.S. Producer Price Index data and Canada GDP, both important for rate outlook and currency direction.

What Happened Last Week

Inflation Data Cools in the U.S. and UK

The most market moving events came from inflation releases. In the United Kingdom, January Consumer Price Index data showed easing price pressures. CPI measures changes in the price of goods and services paid by consumers and is closely watched by central banks.

In the United States, January CPI also came in softer than many expected. That result reinforced the view that inflation is gradually moderating. As a result, traders adjusted expectations for potential Federal Reserve rate cuts later in the year. The U.S. dollar initially weakened before stabilizing as markets assessed the broader economic picture.

Federal Reserve Minutes Show Policy Division

Minutes from the latest Federal Reserve meeting revealed ongoing debate among policymakers. Some officials expressed caution about cutting rates too soon, while others acknowledged improving inflation trends.

For traders, this matters because currencies often move based on expected interest rate differences between countries. If U.S. rates are expected to stay higher for longer, the dollar may find support. If cuts appear closer, the dollar can soften against major peers.

Growth Data Sends Mixed Signals

U.S. Gross Domestic Product data for the fourth quarter indicated a sharper slowdown than earlier estimates. GDP measures total economic output and is used to gauge overall economic health.

Meanwhile, flash Purchasing Managers’ Index surveys for February painted a split picture. U.S. activity showed signs of cooling, while readings in the euro area and the United Kingdom were steadier. PMI surveys track business conditions in manufacturing and services and are considered early indicators of economic momentum.

This divergence contributed to choppy trading in major currency pairs such as EUR/USD and GBP/USD, as traders weighed relative growth prospects.

What to Watch This Week

Lighter Calendar, Higher Sensitivity to Surprises

The week beginning February 23 has fewer major scheduled releases. When the calendar is lighter, markets often react more sharply to unexpected data or central bank commentary.

Japan begins the week with a public holiday, which may reduce liquidity during early Asian trading hours. Lower liquidity can increase short term volatility in currency pairs.

U.S. Consumer Confidence and Housing Data

Tuesday’s U.S. consumer confidence reading will be monitored for clues about household spending. Strong consumer sentiment can support economic growth and influence interest rate expectations.

Housing data will also be watched, as the housing sector is sensitive to borrowing costs. Any significant shift in these figures may affect the U.S. dollar and U.S. equity indices.

Friday Focus: U.S. PPI and Canada GDP

The main event arrives on Friday with U.S. Producer Price Index data. PPI measures price changes at the producer level and is often viewed as an early signal for future consumer inflation. If producer prices rise faster than expected, markets may reassess the pace of rate cuts.

Canada will also release GDP data. Because the Canadian dollar is closely linked to domestic growth and global risk sentiment, stronger or weaker output figures could drive volatility in USD/CAD and broader commodity-linked currencies.

Precious metals such as gold may respond to shifts in U.S. rate expectations, while major equity indices and cryptocurrencies may react to changes in overall risk appetite.

Market Perspective

Last week reinforced a key theme for 2026 so far: inflation is easing, but growth momentum is uneven. That combination keeps central banks cautious and markets sensitive to each new data release.

For forex traders, the primary driver remains interest rate expectations. When inflation cools and growth slows, rate cut speculation builds. However, central bank communication can quickly shift that narrative.

As February closes, traders will continue monitoring inflation signals, growth data, and central bank messaging. With fewer headline events this week, the market may react more decisively to any data surprise, particularly in U.S. inflation-related releases.