It’s that time of year, when Business Link Magazine invites the region’s business leaders to offer up their predictions for the year ahead.
It has become something of a tradition, given that we’ve been doing this now for over 30 years.
Here we speak to Michael Vaughan, director of foreign exchange company, Swift FX.
With the UK avoiding recession and inflation going in the right direction there has been some positivity to end 2023.
Natural gas prices, which spiked after Russia’s invasion of Ukraine, have dropped, aiding a fall in UK inflation. With the US being a net exporter of gas, a rise in the gas price supports the value of the US dollar, one of the reasons it has been so strong for much of 2023. With gas prices falling, the US dollar has corrected against some currencies including the pound. The failing of some US banks in 2023 has also reduced confidence in the US economy cooling demand for dollars.
My expectation for the pound vs US dollar heading into 2024 would be for these trends to continue. I would hope to see 1.30 tested by the end of Q1, but should inflation continue to fall and the Bank of England cuts interest rates, I could see a correction for the pound towards 1.25.
Looking at the pound vs the euro, this is more stable. As with other central banks, the European Central Bank (ECB) has targeted inflation. This narrative was challenged with news that eurozone inflation tumbled in November, dropping to 2.4%. Markets have priced in a first interest rate cut in April whereas the BofE is unlikely to act until Q2. This should result in a positive start for the pound in 2024 and I would hope to see 1.18 with rates adjusting to 1.15 in Q2.
