The British Pound has recovered somewhat from the intense selling that greeted former PM Liz Truss’s unfunded tax cut proposals in September 2022. In 2023, economists at Citi expect the GBP/USD pair to move within a 1.23-1.28 range.

Sterling vulnerable to further bouts of weakness against the USD

“For Sterling to make sustained gains the UK needs to present a sustainable long-term growth strategy. The outlook for 2023 is bleak, with recession likely, the developed world’s worst external deficit and trade with the EU hampered by Brexit.”

“The BoE has an equally difficult task of trying to lower a high inflation rate without deepening the UK recession and home price declines. Against this backdrop, we see Sterling vulnerable to further bouts of weakness against the USD.”

“We expect an average range of 1.23-1.28 until the longer term picture shows improvement.”