London
Cnn
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The British book crashed into a record hollow last fall while investors rebelled against the budget plans of former Prime Minister Liz Truss. Now it benefits from a return.
Sterling has reached its highest level against the US dollar in 10 months on Tuesday, exceeding $ 1.25 for the first time since June 2022. The book, which has advanced around 3.3% against the greenback since the start of 2023, is the most efficient currency among the savings developed this year.
British currency was stimulated by indications that the country’s economy resists better than expected. It is believed that the activity has increased by 0.1% in the last three months of last year, against a previous estimate without growth. The raw growth of the domestic product in January was estimated at 0.3% after falling 0.5% in December.
This resilience strengthens the expectations that the Bank of England will maintain aggressive interest rate increases despite the health concerns of the world banking sector. The increase in rates can increase the domestic currency because they help attract foreign investors looking for higher yields.
Inflation in the United Kingdom also reached an annual rate of 10.4% in February, stressing the need for the Banque d’Engleterre to maintain its difficult approach.
The book plunged nearly $ 1.03 in September 2022 after the farm government unveiled plans to stimulate loans while reducing taxes, triggering panic on the financial markets which fueled the fears of a recession in the United Kingdom.
The International Monetary Fund predicted in January that the British economy would contract 0.6% this year, while all other advanced economies would increase, if only slightly.
“There was a lot of pessimism at a price in the book,” said Francesco Pesole, a currency strategist at ING.
But the bright withdrawal of energy prices and the reopening of China has brought a certain relief on economic prospects since the beginning of the year.
“There was a great revision of growth expectations in Europe, which had an impact on the United Kingdom,” said weigh.
The euro was also lifted by these dynamics, increasing by 2.3% compared to the US dollar in 2023. The book rally was largely clearer because its 2022 decreases were more serious, according to the weigh.
The two currencies were helped by the sharp drop in the green tap of the summits affected last September while the fears of recession broke out in the United States.
A lack of clarity around the next stages of the federal reserve has also retained the dollar in recent weeks. Speculation on investors has increased that the Fed could take a break or stop rate increases due to concerns about the economy after the failure of the Silicon Valley Bank last month.
Jordan Rochester, a foreign exchange strategist at Nomura, said that he thought that the pound could reach $ 1.30 this year and “potentially higher”. But he always sees the risks given the uncertainty surrounding the plans of the Bank of England and the way in which the increases in the rate will meet in the economy of the country. And the weigh has warned that currency fluctuations are often exaggerated when the markets are agitated, as they are now.
“In a volatile market environment, movements are exacerbated,” he said.