Deutsche Forecasts Further Drop In Pound Due To Brexit

Global banking major Deutsche Bank is predicting that the British pound is likely to hit parity with the U.S. dollar and the euro as a result of Brexit. In a special report on Brexit, the bank has stated that the pound is likely to see a drop of nearly 15 percent against the two currencies.

According to Deutsche Bank, the pound’s current value is still not reflecting the effect of a hard Brexit. Taking into account UK’s prevailing current account deficit and slowing growth along with the complicated negotiations predicted for Brexit, the bank forecasts that the pound is likely to reach $1.06 against the dollar

The British government has announced that it will be triggering Article 50 of the European Treaty on March 29 which begins the two year process for the withdrawal from EU. British Prime Minister Theresa May has said earlier that the government is likely to favour a hard Brexit, which implies that companies might lose their passporting access to EU’s single market.

RT UK

Other economists have been more optimistic regarding the pound’s prospects near-term but none of them expect it to return to its pre-referendum pricing any time soon. A Reuters poll amongst 60 banks and research firms shows that on an average experts believe that the pound would be at $1.23 against the dollar by mid-year, but will drop to $1.21 over the subsequent three to six months. The pound is currently trading at around $1.25 against the dollar.

Regardless of the gloomy outlook, Germany’s largest bank is going ahead with its plan to build a new headquarters in London, confirming its commitment to remain in the city. In a statement, Garth Ritchie, Deutsche's UK head said

The move underlines the bank's commitment to the City of London and the importance it attaches to being an employer of choice in the capital. It will advance the bank's strategic goals.

The bank is taking a 25-year lease on the facility, which means it is likely to remain the market at least until 2048. The bank employs nearly 7,000 people in UK. Supporters of Brexit noted that the project indicated that the panic around financial institutions leaving the UK due to Brexit was over hyped.

Last week it was reported that Goldman Sachs would be moving hundreds of positions out of London before the Brexit pact is signed off. Similarly HSBC has said it will shift 1,000 jobs to France while JP Morgan could end up shifting 4,000 of its 16,000 UK roles.

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