Home Daily Commentaries GBP set for more volatility going into 2023

GBP set for more volatility going into 2023

Wednesday 21 December, 2022

Daily Currency Update

The UK public sector net borrowing hit £22.0bn in November, the highest November total since monthly records began in 1993 and a big jump from £13.9bn last year, illustrating the difficult financial situation the UK government finds itself in. GBP is likely to struggle into 2023 with the Bank of England widely seen as closer to ending its rate hikes cycle than the Federal Reserve. A survey by the Bank of England suggested financial market participants expect the UK central bank’s interest rate rising cycle to come to an end in March next year, with rates peaking at 4.25%, up from 3.5% now.    

Key Movers

Top Italian ministers have lashed out at the ECB since it signalled a string of interest rate hikes and told governments to stop showering households and companies with subsidies or face an even “stronger monetary response”. This signalled to investors that the ECB was not prepared to keep financing government deficits as it has done for a decade, particularly since the coronavirus pandemic. During that period, public debts ballooned.

Expected Ranges

  • GBP/USD: 1.2105 - 1.2185 ▼
  • GBP/EUR: 1.1385 - 1.1455 ▼
  • EUR/USD: 1.0605 - 0.0675 ▲