GBP to strengthen against the USD in 2023 – HSBC

Recently, the British Pound has rallied largely alongside risk appetite. As the external backdrop is set to improve, economists at HSBC expect the GBP to strengthen against the USD in 2023.

GBP outperformance, despite challenging UK outlook

“The prospect of a fiscal deficit of around 5% of GDP next year is likely to keep structural concerns about the GBP to the fore, but at least the situation is not set to get worse. This may be enough to support a currency that has weakened so much already, especially as there are early signs that the trade balance has begun to improve.”

“The domestic situation is likely to remain challenging, but external sentiment has been the dominant factor for the GBP in recent years. In an environment where global growth bottoms out, rate volatility peaks, and risk sentiment picks up, the GBP is likely to benefit in 2023.”