In the latest instalment of the ‘Four graphs explaining' series, experts consider sterling.
Baylee Wakefield, manager on the multi-asset team at Aviva Investors
Interest rates will continue to be a key driver for sterling going in to 2024. Our views fit with the gradual disinflation taking place in the UK, but what is not currently priced-in by markets is a meaningful cutting cycle.
We expect a relatively slow decline in wage growth which will lead to somewhat more persistent high core inflation.
However, we expect growth to remain soft in the UK, likely around 0.5% in 2024, with fiscal policy continuing to be a drag. Overall, we believe that the risk of a meaningful cutting cycle is higher in the UK compared to other regions which points to a left-hand tail in possible sterling outcomes.
