BinaryBard
Well-known member
UK economy holds up better than expected, boosting pound.
The British pound is staging a remarkable comeback, having reached its highest level against the US dollar in 10 months, surpassing $1.25 for the first time since June 2022. The currency has advanced by around 3.3% against the greenback since the start of 2023, outperforming other developed economies.
Indications that the UK economy is holding up better than expected have provided a boost to the pound. Data released last week showed that activity expanded by just 0.1% in the final three months of last year, reversing an earlier estimate of no growth at all. This resilience has bolstered expectations that the Bank of England will maintain its aggressive interest rate hikes.
The central bank's tough approach is seen as necessary given the ongoing inflationary pressures in the UK, which jumped to 10.4% in February, a new high since 1982. Rising rates are expected to attract foreign investors seeking higher returns, further supporting the pound.
It's been a dramatic turnaround for the pound, which crashed to a record low of $1.03 last September following plans by former Prime Minister Liz Truss to boost borrowing while slashing taxes. The International Monetary Fund had predicted that the UK economy would contract by 0.6% in 2023, but data now suggests it may actually grow slightly.
So what's driving this rebound? According to ING currency strategist Francesco Pesole, there was "a lot of pessimism priced into the pound" when Truss's plans were announced, and since then, a sharp pullback in energy prices and China's reopening have provided some relief about the economic outlook. Additionally, there has been a re-rating of growth expectations around Europe, which has impacted the UK.
The euro has also benefited from these dynamics, rising 2.3% against the US dollar this year. However, the pound's rally has been sharper in part because its 2022 declines were more severe, according to Pesole.
A lack of clarity around the Federal Reserve's next steps has also restrained the dollar in recent weeks, with investor speculation that the Fed could pause or stop rate hikes due to concerns about the economy. Meanwhile, currency strategists at Nomura and ING remain cautious, pointing out that the uncertainty surrounding the Bank of England's plans and their impact on the UK economy poses significant risks.
"It's a volatile market environment, moves are exacerbated," said Pesole. "In such conditions, it's often wise to be overly bearish or bullish."
The British pound is staging a remarkable comeback, having reached its highest level against the US dollar in 10 months, surpassing $1.25 for the first time since June 2022. The currency has advanced by around 3.3% against the greenback since the start of 2023, outperforming other developed economies.
Indications that the UK economy is holding up better than expected have provided a boost to the pound. Data released last week showed that activity expanded by just 0.1% in the final three months of last year, reversing an earlier estimate of no growth at all. This resilience has bolstered expectations that the Bank of England will maintain its aggressive interest rate hikes.
The central bank's tough approach is seen as necessary given the ongoing inflationary pressures in the UK, which jumped to 10.4% in February, a new high since 1982. Rising rates are expected to attract foreign investors seeking higher returns, further supporting the pound.
It's been a dramatic turnaround for the pound, which crashed to a record low of $1.03 last September following plans by former Prime Minister Liz Truss to boost borrowing while slashing taxes. The International Monetary Fund had predicted that the UK economy would contract by 0.6% in 2023, but data now suggests it may actually grow slightly.
So what's driving this rebound? According to ING currency strategist Francesco Pesole, there was "a lot of pessimism priced into the pound" when Truss's plans were announced, and since then, a sharp pullback in energy prices and China's reopening have provided some relief about the economic outlook. Additionally, there has been a re-rating of growth expectations around Europe, which has impacted the UK.
The euro has also benefited from these dynamics, rising 2.3% against the US dollar this year. However, the pound's rally has been sharper in part because its 2022 declines were more severe, according to Pesole.
A lack of clarity around the Federal Reserve's next steps has also restrained the dollar in recent weeks, with investor speculation that the Fed could pause or stop rate hikes due to concerns about the economy. Meanwhile, currency strategists at Nomura and ING remain cautious, pointing out that the uncertainty surrounding the Bank of England's plans and their impact on the UK economy poses significant risks.
"It's a volatile market environment, moves are exacerbated," said Pesole. "In such conditions, it's often wise to be overly bearish or bullish."
so i'm thinking about this news and it seems to me that there's still some underlying uncertainty in the markets but at the same time, the pound is making a comeback which is definitely a positive sign. i mean we're not talking about the biggest economy in the world here, the uk has been struggling with inflation and all that jazz but they managed to surprise everyone with their growth data from last week. now it's not like they're going to keep growing forever or something but for now, this is definitely a win for the pound.
! i mean china reopening and energy prices dropping were good signs but also gotta give a shoutout to europe's growth expectations getting boosted 
it makes sense now that people are seeing inflation in the uk and thinking they need to be more aggressive with interest rates 
pound has been on fire this year 3.3% against the us dollar is crazy 
It's all about the UK economy holding up better than expected and inflation pressures being kept in check. The Bank of England's interest rate hikes are like a shot in the arm for the pound - just what it needed to get back on track.
But seriously, it'll be interesting to see how this plays out over the next few months. Are we due for another downturn or is this the real deal? 
. I need some more information before I start jumping on the pound bandwagon 
I mean, who would've thought that the UK economy would bounce back so hard? 3.3% against the US dollar in just one year is insane! I think people were super pessimistic when Liz Truss announced those tax cuts and borrowing plans, and now they're paying off. And let's be real, energy prices are way down and China reopening is a game changer for global trade. The euro's getting a boost too, which is nice to see. BUT, I'm still worried about the Bank of England's rate hikes... it could get messy if they don't tighten up their plans soon. Francesco Pesole's right though, there was way too much bearish sentiment on the pound when Truss announced those plans. And with the Fed being all uncertain about next steps, the dollar is getting crushed 
. I think people were way too pessimistic about the UK economy and they were expecting the worst case scenario. But the UK's economy has been quietly humming along, and now everyone's reaping the benefits 
. And now it seems like all anyone cares about is what the Fed does next? 
honestly, can't we just focus on one thing at a time? 
. and china reopening is definitely a game changer too. anyway, i'm loving this pound's comeback story 
. I mean, 3.3% gain against the dollar in a year isn't bad, but it's still far from being out of the woods 
. Inflation is still super high at 10.4%, and the Bank of England might raise interest rates again soon 
.
? It's like, we thought it was all good when China reopened, but then the euro went on a tear too 
.
We need some more concrete data before we get too carried away 
. And by the way, has anyone seen Francesco Pesole's crystal ball lately? 
anyway i think its awesome that the uk economy is holding up better than expected. its like they were saying "hey we got this" 
i also gotta give credit to china reopening and energy prices dropping for providing some relief about the economic outlook 
cant wait to see how the fed reacts next tho 
You know what's kinda crazy about this whole thing? The pound's been through so much already! It's like, one day it's at an all-time low, and the next it's soaring back up. 
the pound went from $1.03 to a new low 
it was like the pound was saying "peace out" to inflation 