Recently, I noticed that the British pound exchange rate has been quite difficult to move, with a somewhat alarming decline. At the end of last year, the pound against the dollar fell from 1.24 all the way down, mainly because the US dollar was too strong. When US employment data was released, it was encouraging, whereas manufacturing data in the UK and Eurozone was weak, naturally putting downward pressure on the pound.

The underlying logic is actually easy to understand. The Federal Reserve expects to cut interest rates by only 0.43 percentage points by the end of this year, but the Bank of England and the European Central Bank are expected to cut by more than double that, and this gap is the main reason for the pound's pressure. Plus, with rising natural gas prices threatening Europe, import costs are soaring, putting pressure on both the pound and the euro. Some analysts point out that the pound is widely held, and once the dollar continues to strengthen, the pound becomes particularly vulnerable during periods of low trading volume.

Looking ahead, the outlook for the pound's movement is still somewhat complex. JPMorgan previously believed it might further bottom out, but in the long term, there are several support levels: the UK's advantage in avoiding US tariffs, along with the fact that the pound's yield is still among the top levels in the G10. So although there is short-term pressure, a rebound is also likely to occur.