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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