Upside potential looks limited.
While the UK’s higher interest rate structure might help the pound hold up against the US dollar, we see it underperforming other currencies such as the euro and Japanese yen over the third and fourth quarters – and progressively losing ground against the Australian dollar as 2023 rolls on. This reflects our comparatively-bearish take on the country’s economic prospects, exacerbated by a persistently large current account deficit and weaker terms of trade.The British economy has so far held up better than anticipated. But with interest rates moving deeper into restrictive territory, and real wages remaining negative, we believe a sharp...