This Deutsche Bank analyst thinks the pound could fall another 16 per cent against the dollar

Emma Haslett
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he pound's dip today may have left some investors a little shaken - but you ain't seen nothing yet, one Deutsche Bank analyst has warned.

George Saravelos, the lender's global co-head of FX, said in a Bloomberg interview that the pound could fall as low as $1.05 - or another 16 per cent.

"Being bearish on sterling is one of our strongest views," he said on Bloomberg TV this morning, citing upcoming Brexit negotiations as a potential disaster for the pound.

"Even though intentions are quite positive on both sides [of the negotiating table], we're very concerned about the lack of time to complete a deal," he said.

"We're worried that negotiations will get stuck around this issue of the payment that the UK has to make to leave the EU, and things will stall quite quickly. It's one of the reasons we're so negative on the pound."

He said Deutsche is expecting sterling to drop "below $1.10, down to $1.08, $1.05".

"If you look at market expectations, data in the UK are at cyclical highs, so the risk is over the next few months, the data starts turning lower again.

"The market is pricing in rate hikes from the Bank of England, which we think is highly unlikely. The risks seem to be quite asymmetric in terms of a weaker pound from here."

Read more: Small businesses are all at sea over Brexit

The pound fell 0.4 per cent to $1.2474 in afternoon trading today, after official figures showed inflation was weaker than expected in January.

However, a number of organisations have become more bullish on the UK's prospects after Brexit - including the European Commission, which on Monday upgraded its forecast for UK growth in 2017 to 1.5 per cent, up from one per cent previously.

That followed similar moves from the Bank of England, the IMF and the OECD, all of which admitted their previous doom-mongering was wrong. So don't write the UK (or its currency) off just yet...

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