Economists at Wells Fargo now forecast slightly less tightening from the Bank of England than previously. Subsequently, the GBPUSD pair is set to plunge toward 1.06 by the end of the first quarter of 2023.

Policy rate to peak at 3.75%

“We expect a 50 bps rate increase in December, and a final 25 bps increase in February next year. That would see the policy rate peak at 3.75%, which is still well below the peak of around 4.65% forecast by market participants.”

“The combination of a protracted economic recession and a central bank that under delivers versus the market's rate hike expectations are key factors behind our view of renewed Sterling weakness into early 2023, with a targeted GBPUSD exchange rate of 1.0600 by the end of the first quarter next year.”