The pound has become the best-performing currency among developed economies in the G10 this year.
With the Bank of England predicted to continue increasing interest rates, the pound has surged gaining 2.3% gain against the dollar surpassing all other major economies in the G10 group.
The G10, or Group of Ten, is a financial arrangement among certain industrial countries. These nations agree to contribute to the International Monetary Fund (IMF), a deal known as the General Arrangements to Borrow (GAB).
Member countries of the G10 include Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States.
Francesco Pesole, FX strategist at ING, said:
“The pound is set to be the best-performing currency of the first quarter of 2023, having gained 2.5 percent against the dollar.
“Along with the improvement in the economic outlook, sterling is definitely drawing benefits from the market’s conviction that the Bank of England will need to continue raising rates.”
In the past month alone, the pound has increased by 3% against the US dollar and outperformed currencies in emerging economies.
The market’s belief that the Bank of England will keep raising rates, combined with the improved economic outlook, is said to be contributing to the pound’s success.
According to reports traders predict a 75% chance of a 0.25% interest rate increase in May and a 52% chance of another hike of the same amount in June.
Earlier this month both the Bank of England and Office for Budget Responsibility also improved their outlooks saying the UK will avoid a recession this year.
