British Pound to strengthen over 2023 – HSBC

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GBP/USD is especially pushed by danger sentiment. Economists at HSBC count on the Pound to bounce again larger.

What is going to really drive the GBP going ahead?

“Threat sentiment (utilizing S&P 500 Index as a proxy), moderately than price differentials, stays the important thing dominant driver for the GBP. In flip, this implies the UK financial outlook is what ought to matter to the GBP.” 

“The BoE now sees a shorter, shallower recession than in its gloomy November forecast, which was primarily based on a lot larger power costs. The UK economic system is now anticipated to contract virtually 1% over the following 5 quarters, moderately than 2.9% over the following eight quarters.” 

“Lastly, we predict a much less hawkish BoE might change into GBP-positive later within the yr, due to a probably much less abrupt coverage shift.”