Analysts have warned that the pound is expected to underperform over the summer against major currencies as the economy slows down, recession fears and uncertainty continue, and the Bank of England pauses its interest rate hike cycle.

Global economic fears

Global leaders at the World Economic Forum in Davos have voiced similar concerns over a possible global recession and the escalation of the war in Ukraine. The war in Ukraine has exacerbated global economic uncertainty and has created “a major setback” to the global economy, as Gita Gopinath, first deputy managing director of the International Monetary Fund said.

High inflation is now a major concern for leading central banks who are forced to raise interest rates, while China’s economy is slowing due to the Covid-19 lockdowns. Multiple global shocks are hitting the world as major economies are starting to recover. The cost-of-living crisis is also a major concern along with the food crisis.

George Soros and WW3

Last night, veteran philanthropist George Soros has warned that Russia’s invasion of Ukraine could be the “beginning of the third world war” that could herald the end of civilisation. In his attack on Vladimir Putin and China’s Xi Jinping at the World Economic Forum in Davos, Soros explained that closed societies and autocratic regimes were gaining traction and that the global economy is heading for a depression. Soros said: “The invasion may have been the beginning of the third world war and our civilisation may not survive it. The invasion of Ukraine didn’t come out of the blue. The world has been increasingly engaged in a struggle between two systems of governance that are diametrically opposed to each other: open society and closed society.”

The 91-year-old former hedge fund owner who is hated by the hard right in the US explained that “repressive regimes are now in the ascendant and open societies are under siege. Today China and Russia present the greatest threat to open society.”

He praised Europe for responding to the war in Ukraine “with greater speed, unity and vigour than ever before in its history.” He added: “But Europe’s dependence on Russian fossil fuels remains excessive, due largely to the mercantilist policies pursued by former chancellor Angela Merkel. She had made special deals with Russia for the supply of gas and made China Germany’s largest export market. That made Germany the best performing economy in Europe but now there is a heavy price to pay. Germany’s economy needs to be reoriented. And that will take a long time.”

Kissinger’s warning

The 98-year-old former secretary of state Henry Kissinger has also expressed his opinion about Putin in Davos. However, for him Ukraine needs to cede territory to make peace with Russia. Speaking via video link to the World Economic Forum in Davos, on Monday, Kissinger said that by alienating Putin, Europe would face dire long-term consequences. He said: “Negotiations need to begin in the next two months before it creates upheavals and tensions that will not be easily overcome,” and that “Pursuing the war beyond that point would not be about the freedom of Ukraine, but a new war against Russia itself.” Kissinger was soon criticised for his statements as many said that his suggestions were unrealistic.

With the current volatility and concerns about an economic slowdown, contacting a currency specialist will allow you to safeguard your business and finances by planning ahead. If you are a business transferring funds overseas, get in touch with Universal Partners FX and their dedicated team to discuss the latest market movements ahead of your currency exchange. Universal Partners FX can provide invaluable help on efficient risk management and tailored solutions to your business’ transfer needs.