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The British pound makes sharp turns


April, 18 2023
watermark Economic news

A few months ago, the UK was considered a country on the verge of the longest recession in history, and the British pound sterling showed a significant drop. However, today market participants have regained optimism about Britain, and many gloomy forecasts already seem exaggerated, as the pound has risen sharply, demonstrating the best dynamics among all major currencies.


Analysts note that they are more positive and see a long uptrend of the British currency ahead. 


However, the UK economy is still not in the best condition: inflation remains persistently high, and is likely to suffer from rising unemployment amid the economic downturn. But it is worth noting that after 11 consecutive interest rate increases, the pound has become an attractive vehicle for investors compared to the dollar.


In particular, the pound rose by almost 5% against the dollar: last Friday it briefly reached a 10-month high at $1.2546. The current quote of the GBP/USD pair is 1.2437. Over the past day, the pound has been showing high volatility, trading in a wide range of 1.2350-1.2440. 


Recall that in November last year, against the backdrop of gloomy forecasts, the Bank of England held the largest interest rate increase in the country in 33 years – by 75 basis points at once. However, already a number of data, including the growth of retail sales and the stabilization of housing prices, suggest that the blow to the economy is not as serious as previously feared. Now the Bank of England no longer expects a reduction in GDP this quarter.


But it is also worth noting that the pound rally may not continue. A number of analysts predict the currency will return to $1.23 or lower by the end of the quarter, as consumer confidence remains weak and the threat of a mortgage rate hike still hangs over many households.


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