The pound began to decline to parity. Johnson Brexit

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Contents

Pound, Brexit. Analytical news.

Urgent analytical news from Forex Broker Weltrade.

Now, in connection with the impending deadline for Britain to leave the European Union, the market situation is increasingly tense. Recall that Boris Johnson himself, the Prime Minister of Britain, indicated the release date until October 31.
Traders from around the world expect a massive decline in the pound, right down to parity of the pound with the dollar.

This state of affairs affects the entire market. We can assume the following events: the pound will pull the euro down with it, gold will continue to grow, oil will remain unchanged, it will remain under pressure, but the cryptocurrency market is expected to rise, but it is difficult to say on what scale.

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No-deal Brexit could sink pound to parity against US dollar, Morgan Stanley warns

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  • Pound could plunge to parity against the US dollar in a no-deal Brexit – Morgan Stanley
  • Pound sinks further after hitting a two-year low yesterday
  • Markets jittery as perceived likelihood of no-deal Brexit rises
  • UK inflation remained steady at 2pc in June
  • House price growth slows to 1.2pc with London prices plummeting 4.4pc
  • Ladbrokes owner GVC reports 19pc fall in like-for-like UK retail sales after betting terminal stake cut
  • ‘Britain is bracing for an economic shock as no-deal Brexit draws closer’ – Jeremy Warner
  • Sign up for our weekly Economic Intelligence newsletter here

T he pound may fall to parity with the dollar on a no-deal Brexit, according to Morgan Stanley.

A drop to historic lows would come under the market’s worst-case scenario of the UK leaving the European Union without a deal, a risk that the bank says is growing.

The pound hit a two-year low below $1.24 earlier today after both prime ministerial contenders hardened their Brexit rhetoric.

Morgan Stanley believes sterling could tumble as low as $1.00-$1.10 if the UK crashes out of the EU.

The only time the pound has previously dropped below $1.10 was in 1985, when it briefly touched $1.05 after the US devalued its currency to fight a strong dollar.

The pound has now dropped 17pc since the Brexit referendum in June 2020.

The Bank of England also said in November that the pound could fall to below parity with the dollar under a no-deal scenario, an analysis that was decried as too negative at the time.

Market wrap: Stock markets weaker as sterling under pressure

G lobal stocks were weaker today after recent record gains in the US while growing concerns about a no-deal Brexit kept the pound under pressure.

London’s benchmark FTSE 100 index closed 0.55pc lower to 7,535.46 while the FTSE 250 ended 0.21pc behind at 19,614.20.

Paris shed 0.76pc and Frankfurt dropped 0.72pc.

Sterling fell to $1.2382, its lowest since April 2020, but recovered some lost ground by late afternoon in London to trade at $1.2433. It was steadier against the euro after hitting fresh six-month lows.

Traders said the overall outlook depends on what happens to US interest rates as concerns continue over US-China trade tensions.

Fibre demand boosts Talktalk

G rowing demand for full-fibre broadband has boosted revenue at Talktalk which climbed 1.3pc to £387m in the 3 months to June 30.

The broadband provider said up to 75pc of new customers were now choosing the high-speed network and that full year guidance remained unchanged.

Shares closed 3pc higher to 108.8p on the back of the news.

Russ Mould at AJ Bell, said: “For a company with such a troubled history as TalkTalk, saying that earnings guidance is unchanged is cracking news for its shareholders.

“They can breathe a sigh of relief that there aren’t new problems to depress the share price and that the business is getting on with the day job.”

De La Rue hits back at activist investor’s threat to oust chairman

D e La Rue has hit back at activist investor Crystal Amber’s threats to oust the banknote and passport printer’s chairman at next week’s annual meeting as “precipitous and destabilising” for the company, writes Alan Tovey.

Crystal Amber – De La Rue’s third-biggest investor with a 6.3pc stake – warned the company on Tuesday it would call a special meeting unless chairman Philip Rogerson stepped down on or before the July 25 annual meeting.

Mr Rogerson has said he will retire after helping find a new chief executive to replace Martin Sutherland, who announced in May that he would quit after overseeing a string of profit warnings and the controversial loss of the company’s contract to print UK passports.

Trade woes hurt stocks

S tock markets in Europe are lower heading into the close as trade concerns have resurfaced.

Yesterday, President Trump said a trade deal with China has a ‘long way to go’, and he also reminded the Chinese government that tariffs could be slapped on $325bn worth of goods.

The announcement from the US leader was a gentle reminder the situation isn’t resolved, and traders used it as an excuse to trim their equity positions.

In the US, the S&P 500 and NASDAQ 100 are lower as traders are a little nervous in relation to US-China trade relations. Both indices recently were at record highs, and the remarks from Mr Trump yesterday acted a speed bump for the bulls.

Traders know when he is angry, and latest comments seem like a mild warning to China, and that’s why stocks are moderately lower.

Workers better off as inflation holds steady and wages rise

I nflation held steady last month as energy price rises slowed and petrol costs levelled off.

Consumer prices in June were up 2pc on the year, matching the Bank of England’s target.

This is below the 3.6pc rise in wages in the past year, indicating workers’ living standards are rising steadily, boosting their spending power and so supporting the economy.

Drivers can breathe a sigh of relief as the cost of running a vehicle rose by 1.9pc, the slowest increase in almost three years.

The price of shoes has fallen more than 7pc compared with June last year, although overall the cost of clothes edged up on the month, indicating the near year-long run of price cuts could be fading.

Food prices also rose by 1.6pc, the biggest annual increase since last summer.

Hotel Chocolat continues to appeal to the sweet-toothed UK consumer

Z oe Mills, retail analyst at GlobalData said:

“Hotel Chocolat’s stores are essential in encouraging consumers to purchase, particularly where shoppers are looking for a gift as staff knowledge allows them to make informed purchases. With a number of pockets of the UK still untapped, it has potential for further store openings in its next financial year.

“Having built up a strong presence in the UK, opening locations in busy international tourist destinations will ensure its expansion into these new territories will be a success as it builds brand awareness and capitalises on its premium appeal.”

Hotel Chocolat delivers sweet trading update

A im-list chocolatier Hotel Chocolat unmasked a strong trading update today on the back of new stores in Japan and the US. The company has been heavily focusing on international expansion.

Boss Angus Thirlwell said: “We have the potential in the US and Japan to grow business and that’s what we’re focused on, but we’ll do it in a careful, measured way.

“The tastes are very similar to the UK. We’re not having to adapt very much, and if we do it’s going to be in most cases attractive to UK sectors.

“There’s a lot of myths and legions about what US and Japanese consumers like. We did quite big tasting panels and what we saw was the recipes most highly thought of by UK consumers were the same.”

Hotel Chocolat posted a 14pc rise in sales to £132m in the year to July 1, adding that profit before tax will be “in line” with market expectations.

The strange history of emojis and how they conquered the world

W hether you’re feeling happy, sad, flirty or angry, there is guaranteed to be an emoji to express your mood.

These tiny symbols have become the fastest growing “language” in the UK. So much so that in 2020, Britain’s most used emoji, the crying, smiling face (��), was awarded Oxford Dictionaries word of the year.

Today, there are more than 2,800 emoji – and that list is growing. Apple, for instance, has released previews of a number of new emoji due to be rolled out later this year, including a range of disability-themed designs.

However, as the number grows so too does the criticism. Last year, a survey by YouTube found that more than a third of British adults believe that emoji are to blame for the deterioration of the English language.

BT sells City headquarters for £210m in cost-cutting drive

B T has struck a deal to sell its City of London headquarters to a fund managed by private equity firm Orion Capital Managers for £210m as part of a major cost-cutting drive, writes Jack Torrance.

The former state telecoms monopoly will lease the building for 30 months while it searches for a new, more modern base of operations.

The 10-storey BT Centre, across the road from St Paul’s Cathedral, stands on the site of the former Telegraph Office, where Guglielmo Marconi made the first ever public transmission of wireless signals in 1897.

The building was damaged during the Blitz and later demolished and eventually replaced by today’s building, which spans 300,000 square feet and was built for BT in 1985.

Car sales across Europe slide into reverse

S ales of new cars across Europe suffered their biggest fall in nine months in June as the automotive industry continues to struggle, writes Alan Tovey.

Registrations of new cars fell by 7.8pc last month, down to 1.45m across the EU nations, according to data from the European Automobile Manufacturers’ Association (ACEA).

In the first half of the year sales were down 3.1pc to 8.2m registrations, as a combination of the backlash against diesel, Brexit uncertainty and a wider economic slowdown prompted by the US-China trade war weighed.

All the major car markets reported a slump during June, with France and Spain suffering the biggest declines.

Andrew Bailey comes under attack from LCF victims at watchdog’s public meeting

F inancial Conduct Authority chief Andrew Bailey faced a barrage of questions at the regulator’s annual meeting with the public on Wednesday as victims of mini-bond seller LCF demanded answers over the firm’s collapse and potential compensation, writes Harriet Russell.

Mr Bailey said the City watchdog was aware of the “worrying situation” and the “risk” that customers’ cash might not be recovered, before chairman Charles Randall confirmed that an independent review into the failure of LCF and its selling practices would not conclude until next summer.

One attendee – a pensioner who had lost a chunk of his savings by investing in LCF products – said customers were worried they would be compensated only if they could prove that they had received inappropriate financial advice.

Last month, the Financial Services Compensation Scheme said it may compensate LCF customers if it found evidence of misleading advice.

Activist hedge fund Elliott takes stake in Saga

B illionaire Paul Singer’s Elliott Management has taken a 5pc state in Saga, weeks after the troubled insurer and cruise ship operator warned that challenging market conditions would hit sales, writes Vinjeru Mkandawire.

The activist hedge fund manager’s disclosure follows the company’s shock profit warning in April, which came after a fall in bookings because of uncertainty around Brexit.

Saga, which specialises in products for the over 50s, has lost nearly 80pc of its value since it 2020 listing. However, news of Elliott’s stake sent shares up 5pc this morning.

The company is on the hunt for a new chief executive after it was announced that Lance Batchelor would step down in January.

‘Tourist pound’ heading towards dollar parity already

W ith sterling now trading at about $1.24, the lowest since April 2020, travellers changing holiday money at airports could already find themselves getting little more than a dollar for every pound.

Airport currency exchange desks are among the most expensive ways of exchanging cash with cheaper options often available online or from banks.

Even cheaper providers will not allow customers to change money at the official exchange rate though as currency exchange desks make their money by building a margin into the rates they offer and, in some cases, by charging an additional commission.

No-deal currency crash could rival Black Wednesday

A Bloomberg survey of strategists in March saw the pound falling to $1.20 on a no-deal Brexit, yet the currency has been the world’s worst performer since then. The pound has now dropped 17pc since the Brexit referendum in June 2020.

“The pound has come under intense selling pressure since Prime Minister May withdrew from her party leadership position, leaving markets with increased concern that the UK may be heading towards a harder Brexit,” said Morgan Stanley strategists.

A 19pc plunge to parity with the dollar would rival the currency’s 25pc tumble on Black Wednesday in 1992, when the UK was forced to withdraw from the European exchange-rate mechanism.

The Bank of England also said in November that the pound could fall to below parity with the dollar under a no-deal scenario, an analysis that was decried as too negative at the time.

Pound could plunge to parity in a no-deal Brexit – Morgan Stanley

T he pound may fall to parity with the dollar on a no-deal Brexit, according to Morgan Stanley.

A drop to historic lows would come under the market’s worst-case scenario of the UK leaving the European Union without a deal, a risk that the bank says is growing.

The pound hit a two-year low below $1.24 earlier today after both contenders for prime minister hardened their Brexit rhetoric.

Morgan Stanley believes sterling could tumble as low as $1.00-$1.10 if the UK crashes out of the EU.

The only time the pound has previously dropped below $1.10 was in 1985, when it briefly touched $1.05 after the US devalued its currency to fight a strong dollar.

Profits soar at Watches of Switzerland in first results since float

B ritain’s biggest seller of Rolex and Cartier watches trebled profits in its maiden results as customers remain unfazed by Brexit blues, writes Laura Onita.

Watches of Switzerland, which listed on the London Stock Exchange less than two months ago, has 128 stores, including Goldsmiths, Mappin & Webb and Mayors in Britain and the US.

Pre-tax profits jumped 180pc to £20m for the year to July 17, while revenues increased from £631m to £773m. Like-for-like sales in the UK rose 10pc.

Chief executive Brian Duffy said the retailer’s more affluent customers, who spend an average of £4,000, were “a little less affected” by political uncertainty and continued to buying Rolex, Cartier, Omega and TAG Heuer watches.

Bill Gates is no longer the world’s second richest man

F rance’s Bernard Arnault, 70, has eclipsed Bill Gates to become the second richest person on the Bloomberg Billionaires Index. Amazon founder Jeff Bezos remains at the top of the list.

Microsoft founder Gates has never ranked lower than second in the seven-year history of the index. Until now.

LVMH boss Arnault has added $39bn (£31.4bn) to his fortune in 2020 alone. His wealth surpassed $100 billion for the first time earlier this year and now stands at $107.6bn according to the index.

Arnault, Bezos and Gates combined wealth exceeds the individual market values of almost every company in the S&P 500 Index

Bank of America delivers record profits

U S earnings season continues today and Bank of America’s consumer bankers extended their winning streak for another three months.

Gains in the retail division helped drive overall profit to a record in the second quarter as loans and deposits grew and mortgage activity surged. The trading division, where revenue declined 10pc, fell victim to the same slump as its bigger rival JP Morgan.

Consumer banking has held up for the big Wall Street banks that have reported second-quarter results this week, cushioning a blow from weakness in trading and advisory businesses.

But warning signs also emerged with JPMorgan, Citigroup and Wells Fargo reporting a dip in margins, stoking fears that interest rate cuts could further pressure profit by reducing the spread between what banks charge on loans and pay on deposits.

Bank of America announced last month it would return as much as $37 billion to shareholders over the next four quarters by raising its dividend by 20pc and boosting stock buybacks.

Employment minister welcomes inflation figures

Minister for Employment @AlokSharma_RDG welcomes the latest employment figures from @ONS and that regular wage growth is outpacing inflation by 1.7% #StrongerEconomy pic.twitter.com/8MhX3htMTk

E mployment minister Alok Sharma has welcomed today’s inflation figures as wages outpace price rises for the 16th consecutive month.

Andrew Bailey’s suitability for Bank of England role questioned

Things are getting heated. one attendee asks how “anyone” could trust Bailey as a possible Carney successor at the BoE

C ity watchdog boss Andrew Bailey risks losing his bonus over the regulator’s oversight of collapsed firm London Capital and Finance (LCF). But that is the least of his worries right now as he faces criticism at the Financial Conduct Authority’s annual public meeting.

His suitability to succeed Mark Carney as Governor of the Bank of England has been called into question. Bailey is considered to be among the frontrunners for the role with some bookmakers offering odds as short as 2/1 on him bagging the top job at Threadneedle Street.

An appointment is expected later this year, after the new prime minister is in place. Carney is due to leave the Bank in January.

EU to investigate Amazon over possible anti-competitive activities

T he EU has said it will investigate Amazon over possible anti-competitive business practices.

The European Commission said the investigation would look into two issues: Amazon’s standard contracts with marketplace sellers and the role of data in selecting winners of the “buy box” which allows buyers to add items from a specific retailer into their shopping carts.

The online retailer said it would co-operate fully with the investigation.

Meanwhile, Amazon has reached a deal with Germany’s competition watchdog to overhaul its terms of service for third-party merchants.

Betting machine shake-up hits sales at Ladbrokes shops

A long-expected crackdown on fixed-odds betting terminals (FOBTs) has decimated sales at shops of bookmaking giant GVC, the owner of Ladbrokes and Coral.

GVC said in March that the crackdown could have a huge impact on the profitability of its shops. Up to 1,000 could need to be shut as a result. Earlier this month rival William Hill said it would close 700 outlets following the FOBT changes.

Faced with an increasingly strict regulatory backdrop, many bookmakers are looking overseas for growth. A key battleground is the US, which last year began the state-by-state relaxation of a decades-long ban on sports gambling.

GVC signed a deal with US casino giant MGM Resorts to create a joint venture called Roar Digital, which is expected to start accepting wagers before the start of the American Football season in September.

Shares are down 1.6pc.

Read the full report by Oliver Gill.

Hard Brexit could send London house prices tumbling further

L ondon house prices had become unaffordable but a no-deal Brexit could trigger a further decline, according to Alex Brandreth at private bank and wealth investor Brown Shipley:

“London is correcting from having become unaffordable – with the house price to earnings ratio over 10 – to being a bit more affordable now.

A further narrowing of the gap between London and the South East, and the rest of the UK is likely – and welcomed by younger buyers. This would be compounded by a hard Brexit which would likely put further downwards pressure on London and South East house prices.”

Investors cheer as Galliford Try says its overhaul is on track

I nvestors in Galliford Try have breathed a sigh of relief after the building firm said it was on track to meet full-year profit forecasts following an overhaul of its contract construction business, writes Jack Torrance.

The FTSE 250 member, known for its work on projects such as the Queensferry Crossing and the roof on Wimbledon’s Centre Court, has been narrowing its focus on more profitable projects after a number of contracts went awry.

Graham Prothero, chief executive, said: “The business is now firmly focused on its core strengths of regional building operations, together with profitable operations in highways and water, all of which are now performing effectively.”

The news sent Galliford’s shares, which have been battered by pessimism about the state of the industry over the past year, up by 7.5pc to 657p.

City watchdog suggests Woodford did not follow ‘spirit of the rules’

Andrew Bailey tells attendees to the FCA public meeting that people should not be buying financial products on the internet without advice in response to questions over LCF collapse

Already name-checked Woodford in intro, saying more should be done to stop firms acting within word of the law but not the “spirit”

A ndrew Bailey, head of the Financial Conduct Authority, is speaking at the City watchdog’s annual public meeting.

So far, he has taken a swipe at firms that prioritise following the letter of the rules rather than the spirit in the wake of the Woodford saga.

Our reporter Harriet Russell is watching Bailey’s speech and will have more later.

Stable inflation and rising wages mean a better standard of living

R ises in prices for food and alcohol contributed to the 2pc inflation figure for the year to June.

Responding to this morning’s data, PwC economist Mike Jakeman said:

“For the second consecutive month, consumer price inflation was exactly on the Bank of England’s target of 2pc year on year. Relative to May, there were slightly larger contributions to inflation from food and alcohol and slightly smaller contributions from transport and housing.

Stable inflation means that nominal wage growth feeding in from the tight labour market will translate into improvements in the standard of living for the economy’s workers. Nominal wage growth hit a new, post-crisis peak of 3.6pc year on year in May.”

Sinking feeling: London house prices plummet

T he 4.4pc fall is the sharpest drop in London house prices since 2009.

If you own a house in London, look away now.

Official transactions-based data show average prices in the capital were down 4.4% y/y in May. That’s a £20.8K drop. Ouch. pic.twitter.com/EHi5CZoD3q

UK rate cut ‘unlikely’ despite benign inflation figures

I nflation has now been bang in line with the Bank of England’s 2pc target for two consecutive months.

James Smith, developed markets economist at ING, said the Bank should hold interest rates steady:

“While the UK consumer price inflation backdrop appears relatively benign, the fact that wage growth is holding up suggests it’s too early to be thinking about rate cuts. But the increasing uncertainty surrounding Brexit suggests policy tightening is equally unlikely this year.”

Modest inflation a ‘relief’ for households

T he British Chambers of Commerce (BCC) has reacted to this morning’s inflation figures. Suren Thiru, head of cconomics at the BCC, said:

“Inflation held steady in June, as the upward pressures from clothing and food were offset by weaker outturns in several price categories including fuel prices and accommodation services. Modest inflation alongside rising pay growth is providing some welcome relief to financially stretched households. However, any boost to consumer spending is likely to be tempered somewhat by weakening consumer confidence.”

Thiru predicted that price rises will remain in line with the current 2pc level:

“While the recent downward pressure on sterling’s value amid growing anxiety at the prospect of a no-deal exit may drive consumer prices higher over the near term, a stalling economy is likely to keep price growth broadly in line with Bank of England’s 2pc target.

With inflation relatively subdued, the MPC’s [Bank of England’s Monetary Policy Committee] focus should be on providing monetary stability to avoid further exacerbating the damage that’s already been done to consumer and business confidence by the continued Brexit impasse.”

House prices plummet in London

House prices in London fell 4.4% over the year to May 2020, the lowest rate of annual growth since August 2009 https://t.co/gAIdbLoLoW pic.twitter.com/6bDynT4oK3

— Office for National Statistics (@ONS) July 17, 2020

W hile prices rose 1.2pc nationally, the growth masks a fall in two regions: London and the North East.

Average prices in the capital fell by 4.4pc in the year to May, down from a fall of 1.7pc recorded in April.

London remains the most expensive place to buy a home – the average price is £457,000. Nationally, the figure is £229,000.

The North West saw the highest annual house price growth in England. Prices jumped 3.4pc in the year to May. The next biggest rise was in the West Midlands, where prices rose 2.7pc.

UK house price growth slows

UK average house prices continued to slow in May 2020, increasing 1.2% on the year – down from 1.5% in April https://t.co/R3VuMi0TKm pic.twitter.com/CR8xoQhUPM

— Office for National Statistics (@ONS) July 17, 2020

S eparately, the ONS has released its latest house price data. It shows that average house prices grew 1.2pc in May, down from 1.5pc growth in April.

Unchanged inflation means real terms wage increases

T he steady inflation rate is good news for employees. Yesterday’s ONS jobs data showed the average weekly wage in the three months from March to May rose 3.6pc (excluding bonuses) on the same period last year.

Unchanged inflation of 2pc means that employees are enjoying average wage rises of about 1.6pc in real terms.

Inflation in line with market expectations

T he 2pc CPI inflation figure is in line with economists’ forecasts and with the Bank of England’s inflation target.

BREAKING: UK inflation unchanged at 2pc

I nflation in June was unchanged at 2pc according to figures just released by the Office for National Statistics (ONS).

Markets update

T he FTSE 100 has slipped 0.27pc this morning to 7,556.70 after two days of gains. European indices have also edged lower with both the Dax and Cac 40 slipping marginally.

A fter reaching record highs on Monday US stocks ceded ground yesterday as the threat of escalating tariffs dampened investors’ exuberance. The S&P 500 ended down 0.34pc while the Dow Jones industrial Average slipped 0.09pc.

The trade war also held back shares in China with the Shanghai Composite index falling 0.2pc overnight while the blue-chip CSI300 index was down 0.06pc.

Pound hits new two-year low

T he pound fell further this morning, dropping as low as $1.2383 before partially recovering to just above the $1.24 mark.

Here’s Neil Wilson of markets.com on yesterday’s sterling dive:

“Make no mistake, this decline in the pound is down to traders pricing in a higher chance of a no-deal exit. We are hurtling towards nodeal and it may prove a disastrous move for a future PM to delay again. Whatever the outcome, volatility seems set to rise from currently rather low levels in FX.

Pound hits new two-year low as markets await latest inflation data

G ood morning. The pound is trading lower this morning, sinking below the 27-month low reached yesterday as markets priced in increased expectations of a no-deal Brexit.

Markets will be watching for the UK’s inflation data this morning. The figures are expected to show that inflation remained benign in June. Inflation in May was 1.9pc, down from 2pc in April.

The figures will also give more context to yesterday’s jobs data, which showed that wage growth jumped to 3.6pc in the three months to May. Higher inflation reduces wage growth in real terms.

Policymakers at the Bank of England will also be watching as they consider whether to cut interest rates later this month.

T here is a decent smattering of corporate updates this morning.

First up, Ladbrokes owner GVC has reported a 19pc fall in like-for-like UK retail sales in the second quarter of the year. However, GVC’s total revenues rose 3pc, buoyed by booming online sales.

Betting shops have been hit by new regulations introduced in April which cut the maximum stake at fixed odds betting terminals from £100 to just £2 in an effort to protect vulnerable punters racking up big losses in a short period. High street bookies have come under pressure due to a combination of the new regulations and declining footfall with about 10,000 jobs at risk in the industry.

In the diary

Trading update: BHP, Euromoney Institutional Investor, Galliford Try, GVC, Hochschild Mining, Premier Oil, Severn Trent, TalkTalk, Hotel Chocolat

AGM: Burberry, Johnson Matthey, Severn Trent, Electrocomponents

Economics: Inflation data (UK), Housing starts (US), Building permits (US), Federal Reserve Beige Book (US), New car registrations (EZ), Construction output (EZ), CPI (EZ)

Deutsche Bank – Pound Will Fall Near To Parity With Dollar And Euro Over Brexit

This is, of course, a prediction and as we know about those they’re very difficult, especially about the future. However, Deutsche Bank is predicting that the pound sterling will fall down to close to parity with the US dollar and the euro. This is certainly within the realms of possibility as a result of the Brexit process although I’d take it with a pinch of salt myself. Before the referendum there was general agreement that the pound was a bit too high and said general thought is today that it’s about right on a trade weighted basis. But FX markets do wander about quite a bit so Deutsche could be right here:

Deutsche Bank has predicted the pound will fall to as low as $1.06 against the dollar due to Brexit.

But despite its gloomy outlook, Germany’s biggest lender is still pushing ahead with plans to build a new headquarters in London.

In one of the most pessimistic forecasts for sterling yet among the world’s big banks, they also said it could fall towards parity with the Euro. That would represent a fall of around 15 percent against both the dollar and euro.

The bit that’s not quite right in that report is the “gloomy” bit. For a falling exchange rate does mean that imports become more expensive, we Britons in Britain are therefore poorer compared to the rest of the world. However, that fall is also stimulation to he British economy–those imports are more expensive so we buy fewer of them, switching or substituiting to domestic production. And equally, the falling pound makes our own exports cheaper, meaning there will be more of them.

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In its 45-page report on the possible consequences of Brexit, the bank said: “We do not see sterling (currently) fully pricing a hard Brexit outcome.

“Combined with limited adjustment in the UK’s current account deficit and slowing growth, we see further downside, and forecast $1.06 in by year-end.”

That fall in the value of the pound is thus exactly what will deal with that current account deficit. That’s just how it all works. And the same bank has made an interesting move despite those Brexit worries:

Deutsche Bank has begun negotiations over a move to new London headquarters in 2023, underscoring the bank’s commitment to the UK despite the uncertainties wrought by Brexit.

All of which is an interesting over view of what Brexit hath wrought. There are going to be adjustments in the British economy, no doubt about it. But they will be adjustments, not some massive wrecking of the whole thing as some Remoaners insist. Because that’s what markets do, adjust to change.

I’m a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the…

I’m a Fellow at the Adam Smith Institute in London, a writer here and there on this and that and strangely, one of the global experts on the metal scandium, one of the rare earths. An odd thing to be but someone does have to be such and in this flavour of our universe I am. I have written for The Times, Daily Telegraph, Express, Independent, City AM, Wall Street Journal, Philadelphia Inquirer and online for the ASI, IEA, Social Affairs Unit, Spectator, The Guardian, The Register and Techcentralstation. I’ve also ghosted pieces for several UK politicians in many of the UK papers, including the Daily Sport.

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