Sterling starts the first full trading week of 2023 around 6% weaker than this time in 2022 against the euro, but still close to its post-referendum average. Could it sink further in the coming months? There is evidence that it might.
The pound’s recovery from the depths of the mini-Budget, where it went to its lowest against the dollar for nearly 40 years and against the euro since the second lockdown, shouldn’t offer much comfort.
Sterling is in a highly vulnerable state going into this year, with projections for growth in the economy some way behind the eurozone and other G7 economies. The systemic weaknesses include the reality of the post-Brexit world, low productivity and high taxes. The mini-Budget may have been ill-conceived but the ills it was attempting to reverse are a fact.
Sterling has seen some very recent strengthening against both the euro and the US$ but the pound against the euro could easily return this year, perhaps sooner rather than later, to the lows of the post-referendum world, where regular, long periods below €1.10 were commonplace. To avoid that risk affecting your own budget, you have the option to lock in your rate with a forward contract and remain unaffected by any weakening of sterling. Do call your trader today on 020 8108 5163 to do that.
Although the week for data releases starts fairly slowly, there will be some telling clues to the state of the economy tomorrow with the BRC Retail Sales Monitor, before Friday’s all-important GDP data. That begins another round of high-level data with unemployment, inflation and consumer confidence readings next week.
