The British Pound Index (BXY) is up 3.40% over the last year and 0.61% YTD as markets have warmed up to the idea of higher rates for longer in the UK. In comparison, the Dollar Index is only up 1% over the last year but has risen 1.80% YTD. Both indexes compare the performances of the respective currencies against a basket of other major currencies.
The Pound’s ascent has likely been due to a combination of upbeat consumer confidence data, rising UK. bond yields, and a slight rise in inflation. The rise in inflation has scaled back expectations for the Bank of England to cut rates sooner rather than later, and this has supported rising bond yields as rates are expected to remain higher for longer.
The stage has certainly been set for the Pound to battle the Dollar in 2024 as interest rates in the U.S. are more than likely to come down faster and well before rates in the UK. Other than the battle between one another, both the Pound and the Dollar are expected to be the better performing currencies in 2024 among all of the majors.