GBP/USD rebound unlikely to continue into 2023 as economic troubles bubble
Investing.com | Author Yasin Ebrahim
Published Dec 12, 2022 04:21PM ET
Updated Dec 12, 2022 04:34PM ET
By Yasin Ebrahim
Investing.com – The pound has racked up double-digit gains against the dollar since its trouncing in September, but it could struggle to take its momentum into 2023 as the Bank of England readies a downshift to a 50-basis-point hike as a winter of economic trouble bubbles.
GBP/USD, or cable, rose 0.13% to $1.227.
“Our game plan assumes that GBP/USD struggles to hold any gains over 1.23,” ING said in a note, forecasting a “winter of discontent” to weigh on the currency.
Cable has jumped about 18% since its low in September, with about half of the gains driven by renewed confidence in the U.K.’s fiscal credibility – following the detrimental impact of former Prime Minister Liz Truss's economic policies – and the other half from dollar weakness, ING added.
But the boost from a weaker dollar is likely to run out of steam, ING says, as the Federal Reserve could remain hawkish through the first quarter of next year. The Bank of England, meanwhile, is set to revert to a 50-basis-point rate hike this week after its outsized 75-basis-point hike in November amid growing signs of a prolonged downturn.
Current market expectations call for the BoE to reach its peak rates of about 4% in 2023, with a rate cut now priced in for 2024. Morgan Stanley said last month it expects BoE to stop hiking rates in March of next year, and to cut interest rates by 150 basis points in 2024.
Data on Monday showing the U.K. economy rebounded in the fourth quarter did little to cool fears of deep and dark recession brewing in the U.K.
“While the rebound in U.K. GDP at the start of the fourth quarter was a touch firmer than had been expected, it nevertheless remained consistent with a downwards trend and reaffirmed that the economy is now probably in recession,” Daiwa Capital Markets said in a note.
Get The News You Want
Written By: Investing.com
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.