Market Recap: February 16 - 20, 2026

Last week was driven primarily by central bank decisions, with the Federal Reserve, Bank of England, and European Central Bank all shaping market expectations around the path of interest rates.

Central Banks Hold Steady

The Federal Reserve held interest rates unchanged at 3.75% on Wednesday. The decision was widely expected, reinforcing the view that policymakers remain in a wait-and-see mode as they assess inflation progress and economic resilience.

The Bank of England followed on Thursday, also keeping rates at 3.75%. Notably, markets had been leaning toward the possibility of a rate cut, so the decision to hold led to a modest strengthening in sterling, as expectations were repriced.

The European Central Bank held its monetary policy meeting the same day. While no major policy shift was announced, the tone remained cautious, with policymakers signalling that:

• Inflation is easing but not yet fully under control
• Rate cuts are possible later in 2026, but not imminent
• Economic growth remains fragile, particularly in manufacturing

Overall, the ECB continues to balance slowing inflation with weak growth, suggesting a gradual and data-dependent approach to any future policy easing.

Market Takeaway

Last week reinforced a key theme: central banks are not yet ready to pivot aggressively toward rate cuts. Markets remain sensitive to incoming data, with rate expectations continuing to shift incrementally rather than dramatically.

Key Events to Watch: February 23 - 27, 2026

Global PMI Data (Tuesday, February 24)

A full set of flash PMI data will be released across:

• The Eurozone
• The United Kingdom
• The United States

These readings will provide an important snapshot of business activity:

• Continued services strength would support the growth outlook
• Ongoing manufacturing weakness may highlight structural fragility

Any surprises could drive volatility in currencies, particularly EUR, GBP, and USD.

UK Inflation Data (Wednesday, February 25)

The UK will release its latest CPI inflation figures, a key input for Bank of England policy expectations.

Markets will be watching for:

• Signs that inflation is continuing to ease toward target
• Any evidence of stickiness in core or services inflation

A hotter-than-expected reading could push rate cut expectations further out, while softer data may weigh on sterling.

Macro Theme: Geopolitics & Oil Prices

Beyond scheduled data, markets must remain highly attentive to ongoing tensions in the Middle East.

• Rising geopolitical risk has contributed to higher oil prices
• Elevated energy costs risk reigniting inflation pressures globally
• Any escalation could trigger risk-off sentiment, typically supporting the US dollar

This dynamic adds an additional layer of uncertainty, particularly for central banks already navigating the balance between growth and inflation.

Summary

Last week was defined by policy stability, with major central banks holding rates and reinforcing a cautious stance on future cuts.

This week shifts focus toward forward-looking data, particularly PMI surveys and UK inflation, while geopolitical risks and energy prices remain a critical wildcard.

Expect heightened volatility, especially early in the week with PMI releases, and continued sensitivity to both macro data and geopolitical developments.

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