2023 New Year Outlook For Pound US Dollar Exchange Rate: Where Next For GBP Vs USD? – Exchange Rates UK

The Pound US Dollar (GBP/USD) exchange rate struggled to find a clear direction on the final day of trading for 2022. A mixed market mood as a lack of economic data left the pairing exposed to domestic headlines and choppy trading conditions.
At time of writing the GBP/USD exchange rate traded around $1.2065, relatively unchanged from the morning’s opening levels.
Despite expectations of inflation finally peaking, the Pound (GBP) struggled for demand on Friday as fears of a continued fall in living standards weighed heavily. GBP investors head into the New Year with little to cheer about as fears grow of a bleak 2023 ahead.
The Resolution Foundation have warned that 2023 could be just as hard on households as 2022 was. Living standards have already plummeted to levels not seen in almost 100 years, disposable income is set to drop by 3.8% in the next year. Sky-high inflation and proposed tax hikes are expected to keep the pressure on millions of households across the UK.
Torsten Bell, Chief Executive of the Resolution Foundation, has warned that the living cost squeeze has been much worse than any period during the pandemic or the financial crisis of 2008. In unwanted news for the UK, the cost-of-living crisis is set to be the same. Bell said:
‘But it looks set to be a groundhog year for many families whose incomes look set to fall by just as much as they did in 2022.’
With both charities and experts alike calling for further government intervention, a Treasury spokesperson has reassured that the UK government is committed in helping the most vulnerable through the crisis:

‘We also have a plan that will help to more than halve inflation next year, bearing down on the financial pressures that households face, and have already lifted millions of people out of paying tax altogether by raising the tax-free allowances for both income tax and national insurance by more than inflation since 2010.’

Elsewhere, further downbeat news, and highlighting the cooling housing market, is news that house prices have plummeted again, for the fourth consecutive month. Marking the longest run of declining prices since 2008, annual growth rate dropped to 2.8% in December from 4.4% in November, marking the lowest since the height of the pandemic in July 2020. Tom Bill, Head of UK Residential Research at Knight Frank estate agency, commented:
Meanwhile, the US Dollar (USD) remained subdued and susceptible to choppy trading conditions. With an extremely thin trading calendar, the ‘Greenback’ was left open to market swings, and a turbulent risk sentiment.
Troubling news out of China kept the safe-haven flows trickling in, preventing the ‘Greenback’ from losing too much ground on its rivals. With the world’s second largest economy winding back its strict zero-Covid policy, investors rarely had chance to cheer the decision before a spate of infections threaten to destabilise the economy once again.
Elsewhere, A lack of data meant USD investors all but checked out for the New Year holiday, with the US Dollar Index trading sideways at 104.00. Caution will remain, and the US Dollar could be left drifting listlessly until after the New Year.
Looking ahead, the Pound US Dollar exchange rate will be left to trade on market sentiment and domestic headwinds as the trading session closes for 2022.
Domestic woes is likely to keep a firm lid on Sterling, whereas the ‘Greenback’ could see a spike if global market sentiment sours on further negative headlines out of China.

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