Sterling looks set to pass peak pessimism in 2023

The FTSE 100 helps the UK economy, but works against the Pound..

 

Just a quick note to start off today's report to say thank you to the many that have got in touch with us to comment on our successful 2022 and the changes we are making. I will get around to replying to you all and also update you on the other changes we are making both near-term and long-term, which include a new and improved website, cross-selling of products, expansion overseas and even some celebrity brand ambassadors.   

A question we have received a lot is; 'what makes me an active customer to keep receiving the reports past this month?'. The reports will be set up to acknowledge any customer that has traded within the last 12-months. If past customers have an upcoming trade to make (who haven't traded in the last 12-months), we can add you to the reports once relevant to you. Prospective customers will be dealt with on a case by case basis.   

Now many of you reading this will know that since the pandemic (and generally in any crisis), the Pound follows the performance of the S&P 500. The most commonly followed index is regarded as the best way to gauge how the stock market is performing overall. As a high-beta currency, Sterling will increase in value when stocks are performing well. 

The FTSE 100 (UK's largest companies) will rarely have a positive impact on GBP as it's 30x smaller than the S&P 500 and more importantly, when performing well, means £ is likely not. Last year, the 'footsie' outperformed all its peers for the first time in many a year. A major reason for this is because the UK offers the highest dividend yield globally and UK exporters benefit from a weaker GBP. Most large UK companies report their earnings in USD and £-$ rates started the year at 1.35 and ended at 1.21. A huge profit margin on top of ready made profit. 

Investment banks JP Morgan & MUFG have today announced that they believe peak pessimism is close to passing as far as the Pound is concerned. Brexit and covid have weighed heavy on GBP in recent years and with many already expecting a rebound in H2 this year, the shackles may be coming off £. Energy stabilization and a more settled political picture are setting the scene for potential growth to come. However, it's still expected to be choppy waters near-term with sour risk sentiment, recession and growth fears all playing their part. 

 

 
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