The pound could end the year as strong as £0.83 against the euro and £0.73 against the dollar in a ‘best case scenario’, according to a panel of experts. The personal finance comparison site finder.com gathered an expert panel consisting of 6 academics, economists and currency experts, and asked them for their predictions on how the pound may fare in 2023, against a backdrop of geopolitical uncertainty.

Experts believe the pound will end 2023 stronger against the dollar than the euro

The expert panel was asked to predict the value of both the euro and the dollar against the pound in July and by the end of 2023.

The short-term outlook of the pound against the dollar was slightly more optimistic, with 50% of experts in agreement that the pound will strengthen by the midpoint of 2023. On average, the experts believe the USD/GBP will stand at £0.84 by July 2023.

The panellists were even more confident on the long-term outlook of the pound against the dollar, with 4 out of 6 (67%) panellists predicting that the pound will strengthen against the dollar by the end of 2023. On average, the experts predict that USD/GBP will stand at £0.81 by the end of the year.

5 out of 6 panellists (83%) agree that the pound will weaken against the euro by the midpoint of 2023 (July), predicting an average rate of £0.92 against the euro at this point in the year.

When asked about the long-term outlook for the end of 2023, the panellists were divided 50/50 as to whether the pound will strengthen against the euro or weaken. On average, by the end of 2023 the experts believe that the EUR/GBP will stand at £0.91.

Experts agree a higher for longer approach is needed to strengthen the pound against the dollar

On average, the ‘best case scenario’ agreed by the experts was a rate of £0.73 against the dollar by the end of 2023. Every panellist agreed that in order to achieve this scenario, the Bank of England would need to maintain a “higher for longer” base rate approach.

Keith Kilcourse, money transfer specialist at finder.com explained that if the “BoE sticks to small steady interest rate rises and waits for the US to pivot first. The Fed could be forced to lower interest rates by Q4 of 2023 and the US dollar will sell off as a result”.

80% of the experts also believe that cutting rates ahead of the Fed could contribute towards a ‘worst case scenario’ of £0.93 against the dollar by the end of the year.

Alexander Tziamalis, senior lecturer in economics at Sheffield Hallam University said that in order to avoid the worst case scenario for the pound against the Dollar we would need to see “BoE interest rates rise faster than Fed interest rates and then fall less quickly”.

Gulcin Ozkan, professor of finance at the King’s College London, agreed that the best case scenario “would be the outcome if the Fed slowed down its rate raising streak and the UK didn’t”.

Northern Ireland Brexit deal is essential for the pound’s success against the euro

A ‘best case scenario’ of £0.83 against the euro by the end of 2023 was agreed by the experts on average. However, the overwhelming majority agreed that in order to achieve this, a resolution for the Northern Ireland protocol would be crucial.

John Wilson, professor of banking and finance at the University of St Andrews, said “Resolution on the Northern Ireland protocol and the improved function of the The Trade and Cooperation Agreement” would be key to strengthening the pound against the euro.

Another factor frequently cited by the experts was a strong rebounding UK economy, particularly if we’re able to recover faster than the EU.

Jon Ostler, CEO at finder.com, said the UK economy would “need to recover faster than the EU’s and the NI dispute be resolved” for the best case scenario to happen.

If these criteria are unable to be met by the end of the year, the experts predict an average ‘worst case scenario’ of £0.91 against the euro by the end of 2023.

For more detailed information on the panel and their thoughts and predictions, visit: https://www.finder.com/uk/currency-predictions

If you are interested in appearing in the next panel, please email: matt.mckenna@finder.com