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Sterling could fall by another 15% by the end of 2017, says Deutsche Bank

Most economists’ forecasts are still more optimistic than that of the German lender, but few expect the currency to recover from its post-referendum lows any time soon

Zlata Rodionova
Friday 24 March 2017 11:50 GMT
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The German lender's global co-head of foreign exchange previously hinted that the bank could cut its official forecast
The German lender's global co-head of foreign exchange previously hinted that the bank could cut its official forecast (Getty)

When it comes to the pound, currency analysts at Deutsche Bank have for months proved to be some of the most bearish across the City, but they’ve just turned even more pessimistic in their outlook for the battered currency.

In its latest special report on Brexit released this week, the German lender said the pound could fall as a low as $1.06 against the dollar by the end of 2017, or another 15 per cent.

“We do not see sterling (currently) fully pricing a hard Brexit outcome,” the bank wrote.

“Combined with limited adjustment in the UK's current account deficit and slowing growth, we see further downside, and forecast $1.06 in by year-end,” it added.

In an interview with Bloomberg in February, George Saravelos, the German lender's global co-head of foreign exchange, hinted that the bank could cut its official forecast. He said at the time that sterling could still slip by 16 per cent against the dollar to $1.05 cent as the "incredibly complicated" nature of Brexit becomes ever more clear.

Most economists’ forecasts are still more optimistic than Deutsche Bank’s, but few expect the currency to recover from its post-referendum lows any time soon.

According to poll of more than 60 banks and research institutions conducted by Reuters that was released earlier this month, forecasters on average expect the currency to trade at $1.23 against the dollar by the end of June, and drop to $1.21 in the subsequent three to six months.

On Thursday, stronger-than-expected retail sales data helped push sterling to a one-month high against the dollar The pound jumped to $1.2528 on the news, its highest since late February and was still trading just below $1.25 on Friday morning.

But the pound is still over 15 per cent down on the dollar since the EU referendum in June and remains volatile, tending to jump or drop on any rhetoric around the nature of Brexit and any data providing insight into the state of the economy.

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