3 reasons why the GBP may fall even lower – Deutsche Bank

“1. Purchasing power parity, which evaluates the exchange rate equivalent to the price of “Big Mac”, between the two countries. Britain is experiencing a shock, which suggests that the GBP will reach the extreme historical undervaluation. 2. An alternative metric – a fundamental effective exchange rate. It estimates the rate needed to restore the country’s current account deficit to equilibrium, which we define as 20-year historical average, or in absolute annual terms, around 40,000,000,000 GBP, or 2.5% of GDP. 3. The main value of the assets. What exchange rate will…

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The British Pound continues to suffer after Brexit

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The British pound fell to a new 31-year of minimum on Wednesday, amid fears of a political vacuum and exit of the country from the EU. The currency slipped to $ 1.2796, the lowest level since 1985, after closing at $ 1.2960 on Tuesday. Analysts are concerned that political uncertainty will have an impact on capital inflows and force companies to delay investment, pushing the economy into recession. The Bank of England has taken preventive measures to support the economy and stimulate lending by loosening capital requirements for banks. “As…

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