Things are beginning to look up for the British Pound

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The British Pound, which for many years was a bastion of solidity, its position as the world's most valuable sovereign currency giving it a unique status among other majors, and its low volatility giving it a guilt-edged reputation for low volatility and dependable long term value.

That all changed during the course of last year, when the combined result of the United Kingdom's exit from the European Union, one and a half years of lockdowns, and involvement in global geopolitical affairs along with a cost of living crisis which is now over a year long, resulted in the British Pound sliding down to very low points against the Euro and US Dollar over a period of several weeks.

As 2023 began, this constant reduction in value began to subside and volatility began, with the Pound sometimes regaining ground against the Dollar and Euro despite the clear economic concerns about the recession-bound British economy.

Today, a little more volatility has been demonstrated, and the Pound rose this morning quite noticeably against the US Dollar, going from 1.19 to the high 1.20 range within an hour of the London markets opening.

This may be the result of a few interesting factors, one of which may be the Office of National Statistics (ONS) having released data that the value of total goods imports into the United Kingdom increased by £155.5 billion (32.3%) and the value of total goods exports increased by £66.2 billion (20.8%) in 2022 when compared with 2021, which is an interesting and confidence-inspiring metric considering 2022's poor economic outlook for the country.

Perhaps the most pragmatic way to view this is that imports did grow, but that is compared to 2021 when supply chain restrictions and lockdowns impeded imports, and consumers were saving their money due to uncertainty about the reopening of the economy.

Either way, this is a positive direction and the Pound is responding in line with it.

Additionally, as London continues to be an international financial and economic powerhouse despite the woes in the rest of the country, global consultancy EY has released figures which forecast that London's economy is on track to expand 2.6 per cent each year between 2024 and 2026, pushing it to the top of the countrywide growth table.

Perhaps it is fair to assume that if this is the case, London is continuing to expand its economy despite the struggles in the provincial areas, denoting two distinctly different economic structures in one country.

London's standing as a global financial capital with the world's best infrastructure for Tier 1 trading bodes well for growth as international business is the backbone of the city's financial ecosystem, therefore an increase in the value of the Pound on the back of such a report is perhaps to be expected.

Certainly despite London’s GDP being expected to undergo a minor slowdown, shrinking 0.2 per cent this year, also the lowest of any region, it is tipped to race past Britain’s average yearly growth of 2.1 per cent between 2024 and 2026.

Therefore the analysis depicts volatility, and the national currency is echoing it very clearly.

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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