The British Pound Could Match The US Dollar In 2023

It pays to be aware of the exchange rate. If you ever travel to another part of the world, you’ll likely have to use a different currency from the one at home. Understanding how that currency fares against your own will tell you how far your money can actually stretch there. Usually, there’s quite a difference between the two values, but things look set to become much more equal for the US dollar and the British pound.

That’s based on reports that the latter could set to drop lower than it ever has before in the coming months. This move would mean that the British pound could match the US dollar in 2023, which could spell further trouble for the global economy. What’s responsible for this estimated change, though, and is there any chance of things turning out differently?

Europe’s energy crisis is largely responsible for issues with the British pound

Plenty of countries around the world haven’t fared that well recently. Even though the US dollar is in a reasonably sturdy position right now, that’s not off the back of a strong economy. The global health crisis is partly responsible for some of these issues. However, the more recent struggles of currencies like the British pound and the euro are mainly the result of the European energy crisis. With countries across the continent struggling with energy supplies and rising prices, the values of their currencies are plummeting. The euro recently fell below parity against the dollar, and now the British pound appears to be heading in the same direction. 

The British pound could set a new record for its lowest level against the US dollar

At the start of September 2022, £1 was equal to $1.15, which is almost the lowest that it’s ever been. The last time the currency came this close to parity with the US dollar was in 1985 when £1 was equal to $1.09. This changed following the Plaza Accord, where the two nations - along with several others - agreed to let the dollar depreciate. People shouldn’t expect to see something like this happen again, though, meaning the British pound may well hit lower levels than it ever has before. A report from UK economist Paul Dales states that it could fall to $1.05 by the summer of 2023, which is a cause of great concern. 

Rising inflation means this prediction for the British pound is likely to come true

Given reports of the UK - along with various other economies - heading for a recession in the near future, it’s perhaps no surprise that the future looks bleak for the currency. Although the UK economy seemed to have started bouncing back following the global health crisis, events in 2022 have seen it struggle significantly. The performance of the British pound has been dire against several currencies, not just the US dollar, thanks to rising inflation. With Goldman Sachs claiming that it might increase to 22% by 2023, there’s little hope of the currency improving against the US dollar anytime soon. While that might seem like a positive for some tourists, the impact on the global economy is nothing to celebrate.

Nothing is ever set in stone with any economy, and we’ve seen plenty of times how things can turn on a dime. However, recovery is generally a long, slow road. So, many say the possibility that the British pound could match the US dollar in 2023 is almost guaranteed.