Pound drops as traders anticipate interest rate cut in March

Pound, gold and oil prices in focus: commodity and currency check, 17 February 

Pedro Goncalves · Finance Reporter, Yahoo Finance UK

Tue 17 February 2026 at 5:59 pm GMT+9 4 min read

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The pound fell by two thirds of a cent against the US dollar to $1.355, its lowest level since 6 February. Against the euro, sterling dropped 0.3% to €1.1465.

The US dollar index (DX-Y.NYB), which measures the currency against a basket of six major peers, was up to 97.23.

Kathleen Brooks, research director at XTB, said the pound was the weakest major currency in early trading.

“The market reaction has been swift. The pound has sunk on this news, GBP/USD is down by 70 points and it has lost the $1.36 handle.

“It is the weakest currency in the G10 FX space on Tuesday, and the pound is now trailing behind the dollar, and is the weakest currency in the G10 so far this month. As the UK economy softens, the bias is to the downside for sterling.”

**Read more: **UK unemployment reaches five-year high and wage growth continues to slow

Money markets increased their expectations of a rate cut after data showed unemployment rising and wage growth slowing.

Traders are pricing in a near-75% chance that the Bank of England will lower rates to 3.5% at its March meeting, up from 69% late on Monday. By the end of the year, investors fully expect two quarter-point cuts, which would take interest rates to 3.25%.

Samuel Fuller, director of Financial Markets Online, said: “This will be welcome news for borrowers and would-be housebuyers, but sterling is wobbling in response. Britain’s economy is stuck and global investors are dumping the pound as UK interest rate expectations head lower.”

Gold (GC=F)

Gold prices fell around 2% in low market liquidity on Tuesday in thin trading conditions, as key markets in Asia remained closed for public holidays and a firmer dollar weighed on bullion.

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Gold futures (GC=F) fell 2% to $4,945.00 a troy ounce, while spot prices lost 1.7% to $4,923.57 at the time of writing, after hitting $4,862 per ounce, its lowest level in more than a week.

“Gold is range-trading around $5,000/oz in a week with lower liquidity due to holidays,” said UBS analyst Giovanni Staunovo.

Mainland Chinese, Hong Kong, Singapore, Taiwan and South Korea markets are closed for the Lunar New Year holidays, while US markets were shut on Monday for Presidents’ Day.

**Read more: **FTSE 100 LIVE: Weak employment data boosts chance of Bank of England interest rate cut

“Thin liquidity with the holidays in the last 24 hours, especially in China and Asia, but also obviously in the United States too, means we just lacked a bid in the market,” said Kyle Rodda, senior market analyst at Capital.com.

Despite the pullback, some analysts pointed to potential upside if momentum returns. “The immediate range top for gold is somewhere around $5,120, but the next real kind of objective here is back to the highs at $5,600 or so, and then of course, we march to record highs,” said Ilya Spivak, head of global macro at Tastylive.

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Oil (BZ=F, CL=F)

Brent crude (BZ=F) futures rose 0.4% to $68.03 a barrel, while West Texas Intermediate (CL=F) advanced by the exact same 0.4% to $63.12 at the time of writing.

Trump warned Tehran of the “consequences of not making a deal” ahead of talks between Washington and Iranian officials in Geneva, raising the prospect of renewed tensions in the oil rich Gulf.

“Market sentiment is closely tied to the tone and progress of these negotiations … sustaining a geopolitical risk premium in prices,” Sugandha Sachdeva, founder of SS WealthStreet, told Reuters.

Oil prices are therefore likely to remain volatile, with sharp two-way swings driven more by diplomatic signals than by underlying supply and demand fundamentals, Sachdeva added.

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Meanwhile, Iran began military exercises on Monday in the Strait of Hormuz, a vital shipping lane for global energy markets and the main export route for Gulf Arab producers. Several states in the region have urged a diplomatic resolution to the dispute.

Iran, alongside fellow Opec members Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, exports most of its crude through the strait, primarily to Asian buyers.

In equities, the FTSE 100 (^FTSE) was higher on Tuesday morning, up 0.3% to 10,510 points. For more details on market movements, check our live coverage here.

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