Monthly Foreign Exchange Update

Sterling at range trading lows

As 2023 draws to a close, we can reflect on a much calmer and slightly positive year for Sterling in the currency markets. After a tumultuous end to 2022, and the legacy of Brexit and Covid, Sterling’s performances has been a welcome respite for Businesses (especially for importers)

At times Sterling has been one of the currency markets 2023’s top performers. Forecast beating economic data, along with sticky inflation, drove the Bank of England to aggressively hike interest rates, which in turn has supported the Pound for most of the year.

Inflation aside, whilst a series of UK economic releases have been positive leaning, it’s striking that the market remains disposed to a pessimistic bias towards the UK. Sterling is not one for sudden spiked rallies, but a post Brexit devaluation of fair value is a physiological fact for many.  JP Morgan cites their own estimates of fair value for Sterling against the US Dollar to be 1.20, with BNP Paribas models suggesting 1.21.  This viewpoint creates the bias in the market, leaving the momentum from positive data capped, with rallies easily retraced by slightly negative data releases.

Sterling did trade above 1.31 versus the US dollar in July, but also traded below 1.20 in February and March.

What to expect in 2024

We expect 2024 to be much the same as 2023. Sterling is set to range trade, see moderate gains on positive data, with the bias to not be overly valued and to average the year in the lower mid of the predicted range.

Forecasted ranges for 2024; against the US Dollar, 1.1750 to 1.3150, and for the Pound Euro cross 1.1050 to 1.2050. These are pretty much in line with the 2023 forecasts, further demonstrating the generally stable outlook. Trading at the bottom of these ranges will as likely be more due to confidence in others than a necessarily negative UK tone.

With cost pressures still a challenge for Businesses, reviewing the costs being incurred and the strategy of managing currency exposure becomes even more important. Specialist support as provided by companies like Ascendant, can fill a gap not provided by larger financial institutions.

Cambridgeshire headquartered, Ascendant would love to hear your views and perspective on The Pound, its expected performance, and the impact to your business. Just contact us on the email below. Ascendant offers Chamber members a free review and benchmark of their current supplier, contact us to hear how we are reducing the cost of foreign exchange for local businesses, and putting relationships at the heart of our customer focused service.

Please contact Karen Benson for any assistance or   T | 01733 972614