The final trading day of what has been a turbulent year is finally here. Unfortunately, the pound has failed to capitalise on a generally softer USD and has been relatively stagnant, in the week coming up to the new year. The same cannot be said for GBP/EUR, in which the pound has seen heavy losses over the past two weeks, influenced heavily by the dovish outlook that the BOE took on their last reference rate meeting. Perhaps the real winner was the Eurozone, with them also consolidating above 1.06 against the USD for ten days straight, a far cry from the readings of a couple of months ago where they struggled to reach parity. The positive sentiment surrounding the EUR may begin to waver in the coming weeks, as concerns over Ukraine and China continue to plague global markets.

China is perhaps now the biggest threat to the world’s major currencies. They have announced they are scrapping their highly controversial zero-Covid policy, so whilst this originally gave the markets a boost, further worrying news followed, with indications China is really struggling to contain the virus. Although official figures state that they are getting around 5,000 new infections and a handful of deaths a day, analysts believe the number to be closer to 9,000 deaths a day with hospitals becoming overwhelmed. This has led many major countries to consider implementing Covid restrictions on China. The US has acted first, bringing back mandatory testing for Chinese residents when travelling to the US, and many countries are set to follow suit. This, coupled with Russia’s rejection of Ukraine’s attempts to broker peace, has weighed heavily on risk sentiment throughout the market.

Many will be breathing a sigh of relief that a year which has seen the Sterling drop 11% against its major rivals (the worst figures we have seen since the Brexit vote) is finally coming to an end. There has been a broad spectrum of reasons as to why this has been such a bad year for the UK, most notably; political uncertainty, concerns over the Coronavirus pandemic, the war in Ukraine, a failing economy and indecision from the Bank of England. However, with these problems still causing major problems in the UK, the outlook for the new year, without some major changes, remains bleak. Although the Pound could still surprise this year, it is becoming increasingly difficult to see the pound returning to the levels we saw in 2021.