The Pound edged down slightly on Friday but remained on track for its third straight weekly gain against a weakening Dollar.

Sterling is forecast to remain vulnerable, according to analysts, as central banks – including the Bank of England – continue monetary policy tightening even into a recession, Reuters reports. 

Rate hike expectations, which typically bolster a currency’s value, could be detrimental to the Pound by clouding the economic outlook. 

“In view of major economic and inflation risks, GBP yields cannot be high enough to prevent particular risk premiums,” stated the head of forex research at Commerzbank, Ulrich Leuchtmann. 

On Friday, the UK’s Office for National Statistics amended producer price inflation numbers, resulting in factory gate inflation being higher than initially thought this year. “The error was because of diesel fuel not being allocated a correct weight within the output price index, which resulted in Petroleum Products being around half the correct weight of 6.5% since the start of the year,” the ONS said in a statement. 

In addition, the greenback was on track for a weekly loss as investor concern increased at the possibility of the Fed slowing down policy tightening. 

The Pound declined 0.3% against the Dollar on Friday morning to $1.2076. The day before, the Sterling reached $1.2153, the highest level is seen since 12th August. Against the Euro, the Pound fell 0.1% at 86.01 pence. It was on course for its third consecutive weekly gain against the Dollar and single currency. 

“We continue to find it difficult to see the current GBP-USD rally as sustainable over the long run given the bleak picture for the UK economy,” said Unicredit analysts.

“The tight budget recently announced by the UK government will likely make it harder for the BoE to deliver the tougher monetary policy to address inflation,” they went on to say.