Sterling has strengthened meaningfully against the US dollar and held a relatively firm range against the euro, reshaping landed costs, sourcing decisions and margin dynamics for UK importers and exporters.
As of early February 2026, GBP/USD has traded near multi-year highs, fluctuating in a 1.36–1.38 range, while GBP/EUR has remained comparatively stable around 1.158–1.159.
The contrast between a sharply weaker dollar and a steadier euro tells an important story for businesses trading across global and regional markets.
USD weakness drives sterling gains
The most pronounced FX movement in January came from the US dollar. The USD weakened by approximately 2.5% over the month, with GBP/USD moving between 1.3379 in mid-January and 1.3823 by the end of the month. In practical terms, this means the pound became more expensive in dollar terms, reducing the GBP cost of US-sourced goods.
Several forces converged to drive this shift. Geopolitical uncertainty played a central role, with renewed tariff rhetoric and trade threats from the US administration creating what markets increasingly describe as a “sell-America” bias. At the same time, expectations that the US Federal Reserve would hold rates steady reduced the yield advantage of dollar-denominated assets.
On the UK side, domestic data surprised to the upside. Retail sales rose 0.4% month-on-month in December, while the UK PMI reached 53.9, its strongest reading in nearly two years. These indicators reinforced the view that the UK economy is proving more resilient than previously expected, prompting markets to scale back expectations of near-term Bank of England rate cuts. That repricing has provided additional support to sterling.
For UK importers sourcing from the US, this has delivered immediate cost relief. For exporters selling into dollar markets, however, it may narrow margins unless mitigated through hedging or contract renegotiation.
GBP/EUR remains contained, but risks persist
Throughout January, GBP/EUR traded within a relatively narrow band, with highs around 1.155 and lows near 1.146. Over the past 90 days, the pair has fluctuated between roughly 1.13 and 1.16, reflecting relative balance between the UK and eurozone outlooks.
Eurozone inflation has stabilised, allowing the European Central Bank to maintain policy continuity. That stability has limited volatility in the single currency. At the same time, the UK’s stronger-than-expected economic prints have helped sterling remain toward the upper end of its recent range, even as longer-term growth concerns cap further upside.
Short-term forecasts suggest modest bullishness for GBP/EUR over the coming month, but longer-term models still point to potential sterling weakness over a one-year horizon.
For businesses trading within Europe, this relative stability supports planning and budgeting, but it does not remove FX risk altogether.
Steadier GBP/EUR rates support predictability, but logistics costs, energy pricing and regulatory pressures still demand close monitoring. FX stability should not be mistaken for the absence of risk. Currency moves are now interacting with freight rates, inventory placement and sourcing strategies more directly than at any point in recent years.
Metro is well placed to support UK manufacturers, exporters and importers as finance and logistics decisions increasingly intersect. If you would like to discuss how these factors may affect your supply chain in 2026, please EMAIL our CFO, Laurence Burford.
