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Has the Pound Trend Changed? GBPUSD Forecast for the End of 2023

Commentaries & Views

The pound sterling has maintained strong positions this year, a state of affairs that endures at present. However, by mid-July, the currency reached the mark of $1.31 and then took a bit of a dip. Let’s dig in to figure out if it was a pit stop before the next rally or if the prevailing trend has changed.

First, we’ve prepared the chart demonstrating the GBPUSD pair movements in the last 12 months. One can notice a decrease in the autumn of 2022 (when the USD was the big-shot currency in the previous year, even outpacing the EUR at some point), followed by steady growth of the GBP.

The retrospective analysis is certainly cool, but let’s zoom in on this summer on the chart. There's that July peak, nearly hitting $1.31, which is marking a 9% growth since the beginning of the year. However, since then the pound has gone downhill. 

The general explanation behind those charts rests on the fact that the US dollar had a surge in 2022 due to the Fed’s pushing interest rate strategy. The Federal Reserve revved up the key rate faster than other major central banks. This fact and the USD’s safe bet status, particularly evident in crises, made it more appealing. 

However, that shine eventually started to fade. Investors were expecting the Fed to ease up, China changed course on its zero-Covid policy, the European Central Bank and the Bank of England were in a bit of a race to see who would raise the interest rate faster. In other words, the USD doesn’t seem to be a front-runner anymore.

Moreover, the United Kingdom looked like the country with the most hawkish central bank stance. Naturally, it gave the currency a boost. Until recently. It turns out that the inflation rate has been cooling down – decreasing from 8.7% to 7.9% in June and then from 7.9% to 6.8% in July. This made a certain number of investors think that the BoE would not pursue interest rate hikes so intensively.

Currently, the UK's key interest rate stands at 5.25%. And the previous forecast suggested an ascent to 5.75%. But now most market participants ensure that 5.5% will be the final point.

Simultaneously, the US economy has slowed down, albeit to a lesser degree than initially anticipated. Therefore, all the signs point to the GBP/USD pair maybe getting closer in value. Most analysts agree that the pair will fluctuate somewhere between 1.26 and 1.29. 

But the future is a bit of a mystery and depends on complex economic events happening in both counties. Forecasts range from 1.15 to 1.30. So, the lesson here is: if you're involved in trading you should be an analyst too, do your research, and then – and only then – make your moves.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.