Economists at TD Securities maintain a bearish view on the Pound and expect the British currency to struggle at the start of 2023.

Further terminal rate divergence between the Fed/BoE

“GBP should have a tough start of the year, reflecting a mix of external and local factors.” 

“On the global side, the USD outlook will feature prominently in the gyrations of GBP. We anticipate further terminal rate divergence between the Fed/BoE, especially as UK growth looks vulnerable to housing risks.”

“Fiscal prudence comes at a cost, likely undermining UK growth relative to the rest of the G10. In turn, low real rates and weak growth won't capture the capital flows needed to plug the current account balance. GBP remains the shock absorber.”