The pound is forecast to rise sharply against the dollar after one of the analysts admitted they had been wrong to underestimate Britain's economic prospects. Sterling is currently trading close to a one-year high against the dollar at $1.26 after a boost from strengthening economic activity and a more resilient housing market.
Vasileios Gkionakis, head of European foreign exchange strategy at Citi, said that its predictions of a "material correction" in house prices and a collapse in consumption had not come to pass. "We have been wrong, plain and simple. The reality is that, while inflation exhibits some idiosyncratic persistence, contrary to what we expected, activity has proven far more resilient."
Kamakshya Trivedi, head of global foreign exchange at Goldman, said: "Essentially, we think that the same factors that acted as headwinds on sterling in 2022—mostly natural gas prices and the relative stance of Bank of England policy—have turned to tailwinds."