The pound Lost 11% In 2022 - One Of The Worst Years Since Brexit
2022 was a turbulent year for the GBP, and for the year ahead (2023), there's little evidence that it will be any better. There are multiple signs that the economic downturn in the UK will only escalate. This has raised fears that the current recovery of GBP against the USD may not be sustainable.
That's why most of the market players are gloomy over the prospects of a stronger GBP against the USD or other currencies, for that matter.
During September, Pound was at its lows but got a little boost due to the weakening of the dollar and the change of government in the United Kingdom. But despite all of these events playing in favor of the Pound Sterling (GBP), the current is still down by around 11% for the year.
Limited Room For Gain In 2023
For the next year, there's very little chance that the GBP will stage any sizable rally against the USD or other major currencies.
Similarly, the policy of the Bank of England is hawkish, but when compared with its peers, it starts to look a lot more dovish. This is escalated by the fact that the UK economy is going down no matter how you look at it. The budget deficit of the UK government is on the rise, and inflation is already in double digits.
As a result of this, the living standards in the UK have seen one of the sharpest drops in history. This has led to lower spending by the consumers and more industrial unrest - The type which was not seen by the UK citizens in a long, long time. A closer look at the housing market reveals that it is also heading toward a sharp correction in 2023.
According to an expert, the UK is racing towards an economic recession due to a combination of tightening by the Bank of England and high inflation. All of these means that we will witness more downside in the Pound Sterling during 2023.