British Pound Outlook for H1 2023
The outlook for the British Pound (GBP) in the first half of 2023 (H1) remains unsure as the economic conditions in the UK and abroad continue to evolve. Since the Brexit referendum in 2016, the UK has seen the British Pound depreciate against most major currencies, while a range of domestic and international political events have further clouded the Pound’s outlook.
Current Outlook
At the start of 2021, the outlook for the Pound has brightened as the UK has led the recovery from the COVID-19 pandemic, largely thanks to the successful rolling-out of vaccines. This has raised the prospects for a post-Brexit trade deal with the EU by the end of 2020, which should help to boost the Pound.
However, short-term fluctuations in the exchange rate are still likely, as political and economic uncertainty remains in the UK and across the world. We may see the Pound weaken in response to rising US Treasury yields or any deepening trade tensions between the UK and the EU.
Factors To Watch In H1 2023
For the Pound’s outlook to strengthen during H1 2023, there are several key factors to watch out for.
UK Economic Growth: The UK’s economic recovery will be pivotal in driving investor confidence in the Pound. The government will need to demonstrate a successful and sustainable economic recovery, which should help to prop up the Pound.
Brexit Outcome: The result of the post-Brexit negotiations is yet to be determined and could have a significant impact on the Pound’s outlook. If a deal is struck and investors perceive it as being positive for the UK economy, this could lead to a strengthening of the Pound.
Political & Economic Stabilisation: A period of relative political and economic stability in the UK, EU and other major markets will be beneficial for the Pound’s outlook.
Conclusion
The British Pound’s outlook for H1 2023 remains subject to domestic and international economic and political events. The UK’s successful recovery from the Covid-19 pandemic will be foundational for the Pound to strengthen in the long-term, provided that the regulators and policymakers can deliver a period of relative political and economic stability. Investors should remain aware of the key factors to watch out for in the coming months to gain a better outlook for the Pound. In recent years, the British Pound has remained resilient despite the ongoing uncertainty surrounding Brexit and the depreciation of the Euro. However, with the UK’s ambitious post-Brexit trade deals being negotiated, the outlook for the Pound in the first half of 2023 is broadly positive.
The UK has appealed to the EU for a trade deal that will bring certainty for both sides for years to come. This process has now entered its eighteenth month and is inching closer to the final agreement. An agreement is viewed as being beneficial for the UK economy moving forward and the resultant decrease in uncertainty coupled with the speculation of improved trade ties, may lead to an appreciation of the Pound.
Furthermore, the UK government has proposed attractive Brexit deals in the form of free port zones, which may encourage additional foreign investments into the country. Such free port zones would enable the free flow of goods and capital in and out of the country, as well as creating more jobs and helping to encourage start-up businesses. This could give rise to a positive outlook for the Pound in the months ahead.
In addition to this, the UK is predicting a V-shaped recovery of its economy and is already seeing a sharp rise in V-shaped growth in some sectors, such as retail and manufacturing. Consumer confidence is on the rise, and the UK is expected to experience a 2020 contraction of 10.6%, which is approximately half of what was initially predicted. Such good economic news should reflect positively on the long-term stability of the Pound.
Finally, the coronavirus pandemic is also set to have a lasting impact on the overall outlook for the pound. As the UK is on track to have developed and established a vaccination programme by the first half of 2023, this should contribute to the stability of the Pound, and possibly result in an appreciation of the currency.
To conclude, with the UK’s post-Brexit trade deal in the process of being finalised, free port zones being proposed, a V-shaped recovery of the economy, and steady progress in the rollout of the COVID-19 vaccine, it is likely that the outlook for the British Pound in the first half of 2023 is in line for a generally positive outlook.