The UK is highly exposed to gas prices and inflation and the pound has fallen 2.5% over the past six months.
But despite this, the British pound has had a good start to the year—its best start to a year since 2018.
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The pound hit a 1-Year LOW in December of 1.32 against the greenback (1 USD = 0.72 GBP) but has recovered into 2022 to above 1.35.
The outlook for the pound is very uncertain due to rising inflation, slowing growth and unemployment, the combination of which could create a nightmare scenario for the Bank of England Monetary Policy Committee.
After peaking at 1.20 the pound has fallen back against the Euro despite Covid data showing that cases in the UK were decreasing at a slower rate and hospital admissions have seemingly peaked.
Besides this, a change in risk sentiment has weighed down the pound. Uncertainty on Boris Johnson’s leadership plus tensions between Russia and the US over Ukraine have been building.
A risk-off market mood always favours the safe-haven Euro over the riskier Pound.
Late January the GBP/AUD exchange rate has dropped from 17-week highs as investors became worried about the state of the pound sterling.
The future of the British pound is unknown as there are talks that investigations into the Downing Street parties could cost Boris Johnson his job, even though he has been trying to remove all virus restrictions and improve his poll numbers.
Both economies have recovered from recent lockdowns and virus struggles, but the Aussie dollar is poised to gain even more after the RBA’s interest rate expectations were brought forward.
The Ukrainian crisis and the risk-off market for European energy supplies have pushed the Canadian dollar down against the Rupee.
At the end of the January the CAD/INR exchange rate was heading towards the 59 mark down from its highs around 61 in October last year.
Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.