Sterling up nearly 6 in 2023, most since 2017
Markets no longer see BoE lagging much with rate cuts
Weak economy, slowing inflation negative for pound
Election likely in 2024, could add volatility

LONDON, Jan 2 Reuters Sterling just had its best year against the dollar since 2017, yet a weakening economy and election uncertainty make a repeat performance unlikely.

It is not hard to see why investors flocked back to Britain39;s currency after it hit a record low only 16 months ago the economy did better than feared, sticky inflation meant the Bank of England was set to wait longer than its peers with monetary easing and the dollar39;s appeal waned on expectations for an early U.S. rate cut.

The pound, trading near 1.28 , rose almost 6 last year against the dollar making it the secondbest performing major currency after the Swiss franc.

It is also quite far from an alltime low of 1.0327 it hit in 2022 when then Prime Minister Liz Truss rattled markets by proposing unfunded tax cuts.

While this puts sterling on stronger ground heading into a likely election year, the rally39;s drivers are losing momentum.

First is the fading impact of interestrate differentials, a major influence in the 7.5 trillionaday global currency market.

Jane Foley, head of currency strategy at Rabobank, said that while a perception that the BoE would lag European Central Bank and Federal Reserve policy easing had boosted sterling, this theme had been thrown into disarray by the latest…