Economists at Scotiabank expect the GBP/USD to stabilize around 1.20 in the first half of the year. A sustained move higher towards 1.25 is likely latter in 2023.

A sizeable correction is likely after the Q4 snap higher from record lows

“We expect stability around current levels through H1 and some modest strength emerging against a generally overvalued USD in H2 as the global monetary policy tightening cycle matures. At this point, we expect investors will be starting to consider the prospect for easier Fed policy and will be ready to re-embrace risk and move out of the USD.”

“From a (broad) technical point of view; we look for firm GBP support on weakness to the 1.14/1.16 range in Q1. 

“A sizeable correction is likely after the Q4 snap higher from record lows. Resistance is 1.2450/00, with an extension to the 1.28/1.30 range likely above 1.25.”