Will the Pound recover after having its worst month for a year?
The outlook for Sterling exchange rates changed in September, with the Pound experiencing its worst performance for a year against the US Dollar.
After having a very strong first half of 2023, when the Pound was the strongest performer within the G10 group of countries, the Pound remained quite rangebound for a couple of months but now there seems to be a bias to the downside.
September was the worst month for GBP/USD for a year, and GBP/EUR saw the biggest 1-month drop since December last year.
The drop for GBP/USD was not far from a 4% drop and came about not just because of USD strength, but because the Pound lost value against most major currency pairs.
The Bank of England (BoE) paused it’s 14-consecutive rate hikes and decided to keep rates at 5.25%, and many economists are predicting that there will be no further hikes. The Pound declined as a result as previously the outlook had been as high as 6.5% for the peak of interest rates in the UK due to much higher inflation levels within the UK than its peers.
Low growth expectations are also a reason for the drop in the Pounds value. A key release of economic data this week out of the UK is the GDP figures which will be released on Thursday and measure economic growth in the UK.
The previous figure showed a negative reading of -0.5% whereas the expectation is for 0.2% this time around.
GBP exchange rates could come under increasing pressure if the figure released is lower than expected, as further signs of an economic slowdown could impact the Pound in a negative way. I think economic growth, inflation levels and the Bank of England’s policy outlook are the key factors for the Pound at the moment.
The post Will the Pound recover after having its worst month for a year? appeared first on Pound Sterling Forecast.
Source: https://www.poundsterlingforecast.com/2023/10/will-the-pound-recover-after-having-its-worst-month-for-a-year/
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