A look back at 2022 for the Pound

Hi everyone,

 

2022 was a 'bumpy' ride to say the least for Sterling and the market in general. The world was faced with huge supply chain issues mainly due to the ongoing Russia-Ukraine war (as-well-as covid), an energy crisis on the back of it too, record inflation in most key economies and UK political 'madness'. All significant events that simply created havoc on the worlds biggest market. 

 

The US Dollar reigned supreme throughout most of the year, breaking parity for the first time against the Euro and hitting the highest level on record versus the Pound. Sterling had a classic year of two halves. The first half was exciting, especially after being under so much pressure the previous two-years with the pandemic. Then things went south and quick. The Euro played the part of the 'sitting duck' most of the year, a well known role to GBP in recent times..

 

Central bankers weighed heavily on the market this year with interest rates, economic and inflation forecasts and guidance on monetary policy all key drivers each and every month. The BoE were the first to raise interest rates to help curb inflation, however they have been passive in determining how high they should go compared to others. This was a big reason GBP fell 10% versus the USD & 5% versus the EUR since the beginning of 2022. 

 

The average rate for £-$ was 1.2370 and for £-€ it was 1.1730. The latter, ended up being 1% better overall compared with 2021. The former though was down 10% from the previous year. Average rates are good to notice trends and place values, but for the consumer, actual rates are what matters..

 

A mid-market high of 1.2150 and low of 1.1150 was achieved by £-€ in 2022. In monetary terms and for real life purposes, the difference on a £-€100,000 exchange was £7,400 between the high and low of the year. 

 

A mid-market high of 1.37 and low of 1.0720 was achieved by £-$ in 2022. Again, if we put that into context for your pockets, the difference on a £-$100,000 exchange was £20,300 between the high and low of the year.

 

The Pound starts off the new year at the exact same level as January 2021 against the Euro. That year, rates finished 5% higher compared to where they started. We will soon find out from investment banks, algorithmic companies and others what the initial forecasts for Sterling are. For now, if I had to hazard a guess, I would say there is an equal chance that the Pound may climb 5% and could very well lose the same value. 

 

Cable is starting off the year at the lowest rate on record for the month. 2017 was the last time it was near the current low and even then we are talking a 3% difference. 2021 & 2022 started off the same for £-$, which was a huge 15-cents above current levels. Forecasting this currency pair is extremely difficult due to the amount the $ is traded daily and with £ being a high-beta currency. It makes for a very volatile pair in an already volatile market. 10% either way would be a natural call for the pair just now. 

 

Tomorrow we will take a deeper dive into what 2023 could bring..

 
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