On Tuesday, the Pound Sterling rose to its highest level in the last month against the US Dollar. This data also shows the pace of pay growth in Britain. The Bank of England is also starting to be concerned about what will happen to the future recession.

Then the Yen was close to seven month highs as investors held a potential policy shift at the Bank of Japan (BOJ). Then the Pound rose 0.5% to $ 1.2261, near its highest level in one month. 

Meanwhile, the data also shows wage growth at the fastest pace in the last three months. Employment rose by a faster-than-expected 27,000, but the Bank of England will only count this condition once the economy grows. 

The Bank of England Governor also said that the workers in the labour market played a significant role in forecasting inflation.

Foreign Exchange strategists at ING and Monex Europe also said it was too soon to dismiss the risk of another 50 basis point interest rate increase planned for February, especially since this is a rate hike for the 10th consecutive time.

Sterling Slips Ahead of UK Jobs Based on Existing Inflation Data, and Sterling Edges As Tight Labor Market For Rate Hikes

"The BoE is unlikely to change what they have set, namely an increase of 50 basis point interest rate," said several foreign exchange experts. This speculation is based on another adjustment, a great deal of currency market reaction to growth.

On the other hand, Pound Sterling had to fall against the Euro and US Dollar on Monday last night. And the increase on Tuesday pushed further progress. Sterling, down 0.3% on Monday, turned things around by returning higher values on Tuesday.

"IT is unclear that this week's data will add to those softer expectations; wages and inflation could remain high. Bank of England tightening expectations of coming under pressure over coming months, said ING Head of FX Strategy Chris Turner.

At its current position, the British Pound edged higher on Tuesday after data showed a tight labour market and accelerating pay growth. This also makes the Bank of England even more worried about inflation, and they are trying to bring it down to a multi-decade low.

"With generational unemployment at lows, the labour market remains tight, and the economy is resilient. The Bank of England may be forced to raise rates slightly more than people think. That's one of the reasons why the Pound has been well supported," added Laidler.

"Depending on the resilience of tomorrow's release of December UK CPI data, it is possible for them to simply dismiss the risk of another 50 basis point rate hike," said Chris Turner, ING's Global Head of Markets.

What Could a Recession Mean for the Pound in 2023

This makes many determine what effect the recession will have on the Pound in 2023. With its erratic rise and fall, the Pound is, of course, a currency that has the potential to face the worst recession of all major economies.

The risk of the sterling tumbling to another record low against the US dollar can be caused by many things. Britain's economy is susceptible, and the darkest point for this currency is when the FED finally turns around and provides liquidity.

Britain began to propose changes to capital rules for insurers and policyholders. He said that companies were asked to invest in infrastructure and fight financial stability risks.

For now, the Bank of England says there will be changes in several sectors. This is a strategic way for English forex traders to help boost economic growth from the UK. But the current price increase has been enough to allow the UK industry.