Pound recovery is unlikely to continue in 2023

The policies of former Prime Minister Liz Truss had a damaging influence on the finances of the UK, but confidence was restored, and the dollar weakened. This is reflected in an 18% rise in the GBPUSD pair. However, in 2023 the pound may have difficulties in growth. This is reported by ING.

ING predicts a tough winter for the pound, suggesting that holding above 1.23 will be the main target for the GBPUSD pair.

The Fed may remain hawkish during the first quarter of 2023, so momentum from a weaker dollar will probably dissolve. Growing signs of a recession pushed the Bank of England to raise rates by 0.75% in November. It is considering a 0.5% rate increase this week.

Concerns about a deep recession in the U.K. remain, even despite the economic recovery indicated by Monday's data.

A report from Daiwa Capital Markets said that the downward trend is compliant, and it confirms that the economy is in recession, although at the beginning of the fourth quarter, the GDP data were better than expected.