Economists at Wells Fargo expect the GBP/USD pair to move gradually higher toward 1.22 by the end of the year.

BoE will be comfortable shifting to a slower pace of rate hikes

“Should inflation continue to show a pronounced declaration, and activity and survey data show renewed softening, we expect the BoE to deliver a final 25 bps rate to 4.25% in March and to begin cutting interest rates as early as Q4 of this year. Our forecast policy rate peak is well below the level implied by current market pricing.” 

“The less aggressive approach we envisage from the BoE is an important reason we expect that, over the medium-term, the Pound will be an underperformer against a broadly soft USD, targeting a GBP/USD exchange rate of just 1.2200 by the end of this year and 1.2400 by mid-2024.”