Throughout 2024, the pound exhibited volatility, reaching a high of $1.3434 on September 26 and a low of $1.23 on April 22. The average exchange rate for the year was $1.2782.
The recent depreciation is largely attributed to the U.S. dollar's robust performance, driven by expectations of sustained high U.S. interest rates. The dollar's strength has been a significant factor influencing currency markets, with the yen also nearing a five-month low.
Analysts from major investment banks had previously projected the pound to strengthen, anticipating it would reach $1.35 by the end of 2024. However, the current exchange rate of $1.2422 indicates a deviation from these forecasts.
The pound's decline is part of a broader trend observed in various currencies against the dollar. For instance, the Mexican peso recently weakened by nearly 3% against the U.S. dollar due to political developments.
In the past week, the pound decreased by 0.31% to $1.2687, marking its largest one-week percentage decline since April 19, 2024. This is the second consecutive week of decline, with a cumulative loss of 0.42% over the last two weeks.
The pound's depreciation has implications for various sectors, including importers facing higher costs and potential inflationary pressures. Conversely, exporters may benefit from increased competitiveness due to the weaker currency.