The pound sterling (GBP) started the year strongly, outperforming most of its major currencies. Economists at Scotiabank analyze the GBP outlook.
GBP's outperformance at the start of the year is easing
Positive UK data suggesting some surprising resilience in the economy saw the BoE cut rates significantly, while a boost in global equities gave the quasi-high-beta GBP a risk-on boost.
Cable gains were capped slightly above 1.2800, while solid support developed on the decline to 1.2600 as speculative traders and hedge fund traders reinforced the bullish position.
Short-term trends turned more negative in early February when GBP/USD weakened below 1.2600, but we still expect modest GBP gains (mainly in 2H) this year as global rates soften and risk appetite increases.
GBP/USD – Q1-24 1.2500 Q2-24 1.2500 Q3-24 1.3000 Q4-24 1.3000