Deutsche Bank's Five Reasons Why the Pound Is Overvalued
How Damaging Is a Scotland Referendum to the Pound?
For Deutsche Bank AG strategist Oliver Harvey, momentum is shifting back in favor of a weaker sterling.
The currency's advance in the weeks since the U.K.'s High Court ruled that the official process to exit the EU can't be triggered without parliamentary approval has boosted the pound to levels that now justify betting that it will against fall against a basket of trade-weighted basket of currencies, the strategist said in research published on Monday. He cited the challenges posed by everything from politics and capital flows to the composition of China's currency reserves.
Sure enough, this morning's threat that Scotland may hold a second independence vote in the event that the U.K. loses access to Europe's single market underscored the risks on the horizon. That news drove the pound 0.8 percent lower against the Deutsche Bank trade-weighted basket, paring its gains since the High Court decision to 4.5 percent.