empty
 
 

Forex Analysis & Reviews: GBP/USD. Spreading wings does not mean conquering heights. Plans for 2023
time 01.12.2022 11:49 PM
time Relevance up to, 02.12.2022 01:00 PM

This image is no longer relevant

Federal Reserve Chairman Jerome Powell, as expected, triggered volatility in the markets. Investors are now more confident in their assumptions about the Fed's interest rate, and the dollar index is down to a 15-week low. What's next

The dollar broke down two figures, settling at 105.40 on Thursday. There is a risk that the indicator will go even lower after Powell signaled a slowdown in future tightening.

"We think that slowing down at this point is a good way to balance the risks," Powell said.

The central bank should reduce the size of rate hikes as early as December. Market prices have indicated that the federal funds rate will peak below 5% in May 2023. This is lower than previous expectations of a peak above 5% in June.

Nevertheless, Powell said that "it is likely that restoring price stability will require holding policy at a restrictive level for some time". Investors await more U.S. data to gauge the health of the world's largest economy, as evidenced by Friday's key monthly jobs report.

The main consequence of Powell's speech in the currency market was that he again thwarted the dollar's attempts at recovery. The greenback will likely remain under pressure as long as the topic remains relevant. Looks like Friday's U.S. labor market data will come as a nasty surprise.

What is really relevant to the financial markets is that the Fed's monetary policy is normalizing. A 75 bps rate hike remains a thing of the past.

Meanwhile, economists at ING believe that the dollar will be able to find the strength not to fall further.

"We are tempted to say that looks like an overreaction in that while Chair Powell did acknowledge the slowing in the pace of hikes, his core message was one of stubbornly high core inflation, particularly in the core services ex-housing category."

"The core PCE inflation data is the biggest input, and we prefer DXY to find support near 105.00", ING economists said.

This image is no longer relevant

The dollar's decline made it possible for other currencies to rise. The pound is showing bright dynamics, and analysts urge others to forget about earlier forecasts stipulating the pound's fall similar to the September one. Estimates on the GBP/USD pair change dramatically given the updates.

GBP/USD rose to a high of 1.2140 on Thursday, dropping to 1.1900 ahead of Powell's speech.

According to ING, "this rally could extend to the 1.22/23 area unless either today's US core PCE data or tomorrow's US jobs data can put a floor back under US yields."

Downside risks for the pound are exaggerated, and the record lows seen this year are unlikely to be tested. Political turmoil seems to be a thing of the past, too, NatWest wrote in its 2023 pound forecast. The British bank expects the pound to strengthen against the dollar and remain relatively stable against the euro.

The key drivers of the pound's growth in the new year will be energy prices and related impact on the country's current account.

It is worth worrying about energy prices rising again and growth continuing through 2023. This will lead to weaker economic growth, increased government borrowing and a current account deficit.

England typically has a current account deficit because the country imports more than it exports. This imbalance leads to currency outflows and puts downward pressure on the pound.

This image is no longer relevant

The inflow of foreign capital from international investors is protecting the pound. So sterling is weaker when import costs rise or foreign investors are no longer willing to finance deficits by increasing inward investment.

Much will depend on what happens to energy prices.

"Prices are expected to be well below their summer peak. Demand for energy is declining at double-digit rates, enough to eliminate power outages unless the winter is unseasonably cold. Consequently, the fuel shortage could shrink markedly in the coming months," economists wrote.

Meanwhile, a rapid rise in the pound in 2023 is unlikely, warns NatWest.

Britain is sliding into recession. This is now the consensus expectation among institutional, independent and international economists and reports continued pessimism about the pound.

The Bank of England will have its say in December. A rate hike is seen as the main domestic risk event for the pound. The markets are divided on the increase. Some expect 50 bps, others 75 bps.

The pound has a tendency to weaken after the BoE announces its decisions, as the scale of rate hikes tended to be smaller than the market expected.

NatWest tends to think that a cycle of policy tightening will not provide sterling with much support.

So, if we look at the pound's trajectory, we can see a gradual rise against the dollar and a sideways movement with the euro.

The GBP/USD pair is expected to rise over the next 12 months as the dollar retreats from cyclical highs. As uncertainty persists, the quote will continue to move in a wide trading range.

Growth against European currencies will be more limited as regional economies face a similar cost-of-living shock.

The GBP/EUR pair will end the year virtually unchanged, although risks are skewed upward. GBP/USD will be at 1.2000 by the end of the first quarter of 2023, reaching 1.2200 by the end of June and 1.2300 by the end of September.

Natalya Andreeva,
Chuyên gia phân tích của InstaForex
© 2007-2023
GBPUSD
Great Britain Pound vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade

InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.

  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    THAM GIA CUỘC THI
  • Tiền gửi lần truy cập
    Ký quỹ tài khoản của bạn với $3000 và nhận được $10000 nhiều hơn!
    Trong Tháng 01 chúng tôi xổ $10000 trong chiến dịch Chancy Deposit!
    Có được một cơ hội giành chiến thắng bằng việc ký quỹ $3000 vào một tài khoản giao dịch. Đáp ứng được điều kiện này, bạn trở thành một người tham gia chiến dịch.
    THAM GIA CUỘC THI
  • Giao dịch khôn ngoan, thành công
    Nạp tiền vào tài khoản của bạn với ít nhất $ 500, đăng ký cuộc thi và có cơ hội giành được các thiết bị di động.
    THAM GIA CUỘC THI
  • 100% tiền thưởng
    Cơ hội duy nhất của bạn để nhận 100% tiền thưởng khi gửi tiền
    NHẬN THƯỞNG
  • 55% Tiền thưởng
    Đăng ký tiền thưởng 55% cho mỗi lần gửi tiền của bạn
    NHẬN THƯỞNG
  • 30% tiền thưởng
    Nhận 30% tiền thưởng mỗi khi bạn nạp tiền vào tài khoản của mình
    NHẬN THƯỞNG

Recommended Stories

EUR/USD: the dollar is cautious as it seeks ways to rise, but the euro is stubborn

The U.S. currency from time to time is trying to rise and get a foothold in the upward spiral, but more often than not those efforts are blocked

Larisa Kolesnikova 10:55 2023-01-30 UTC+2

US stock market closes higher, Dow Jones gains 0.08%

At the close of the New York Stock Exchange, the Dow Jones rose 0.08%, the S&P 500 rose 0.25%, and the NASDAQ Composite rose 0.95%. The leading performer among

Thomas Frank 04:05 2023-01-30 UTC+2

European markets closes the week with growth

Major Western European indexes were trading higher on Friday after falling the day before. European markets advanced after a spectacular rise in US and Asian stock markets. Mining stocks rallied

Irina Maksimova 00:45 2023-01-29 UTC+2

The dollar is swirling in a cycle of new numbers. The Fed has the last word.

Market sentiment is mixed, with traders trying to catch the most accurate signal coming from U.S. data. While people are almost certain that the Federal Reserve will be less aggressive

Anna Zotova 00:45 2023-01-29 UTC+2

Second straight day of gains for Asian markets as uptrend continues

Major Asian indexes continued to rise on Friday, though the upside movement was not as strong as it was yesterday. In Japan, the Nikkei 225 inched up by only 0.05%

15:53 2023-01-27 UTC+2

Oil prices edge up, and Russia transfers record volumes on high seas

Oil is steadily rising in trading on Thursday amid expectations of increased demand. The easing of some quarantine restrictions in China promises the market a recovery in consumption this year

Natalia Andreeva 22:52 2023-01-26 UTC+2

Asian stocks move in different directions again

Asian equities were moving in different directions on Thursday. The Hong Kong stock exchange trading resumed, and the Hang Seng Index immediately showed an increase of 2.02%. The Korean KOSPI

22:52 2023-01-26 UTC+2

Winter for the dollar, summer for the euro: USD doesn't know how to get out of the pit

The dollar is still stuck in the financial pit. The greenback fell to an 8-month low on Thursday, once again yielding to the euro. Market participants expect

Larisa Kolesnikova 08:14 2023-01-26 UTC+2

US stock market closed mixed, Dow Jones up 0.03%

The US stock market ended Wednesday's trading in different directions due to the strengthening of the telecommunications, consumer services and finance sectors. The market demonstrates against the backdrop of negative

Thomas Frank 04:16 2023-01-26 UTC+2

The pound is resisting the downturn

The British currency successfully resists the downtrend, although the periodical GBP slump gives investors a reason to be pessimistic. However, sterling refuses to stand still. At the beginning

Larisa Kolesnikova 08:42 2023-01-25 UTC+2
Không thể nói chuyện ngay bây giờ?
Đặt câu hỏi của bạn trong phần trò chuyện.