Deutsche Bank doom forecast: pound and economy will get weaker in 2017

GERMANY’S biggest lender Deutsche Bank talked the pound down and predicted Britain’s currency will weaken amid Brexit negotiations and a deterioration in the UK economy. Deutsche Bank doom Deutsche Bank forecast 2017
Deutsche Bank forecast the pound will fall lower but the FTSE 100 will rise
The bank said sterling is set for further weakness in 2017, as political developments knock the currency. Deutsche also unleaded a doom-monger outlook for Britain’s economy and domestically focused stock index the FTSE250. Shares have hit record highs in recent days, with the index now up about 15 per cent compared to a year ago. It comes after UK economic measures have beat expectations in recent months. Yet Deutsche said the FTSE 250 could fall about five per cent this year, as the economy falls. Analysts at the bank said economic measures signal UK growth of around at 2.5 per cent in 2017, but said this strong performance is not likely to continue as the banks expects growth to be at just 1.6 per cent. Instead Deustche said it was backing the FTSE 100 index for further gains, as around 60 per cent of the stock index’s revenues come from overseas. Analysts said the weaker pound could help the share measure rise another five per cent in 2017, and stocks in the FTSE 100 are currently cheap. In a research note, experts at the bank said: “Our FTSE 100 model points to around five per cent relative upside until year-end, given DB macro forecasts and our projected underperformance of cyclicals vs defensives. “Valuations further support the FTSE 100 overweight: the relative 12-month forward P/E is close to a three-year low – and the UK ranks as the cheapest market on our European country valuation scorecard. “The FTSE 250 has outperformed the FTSE 100 by five per cent since the beginning of the year, as UK PMIs have shown unexpected strength. “Yet, PMIs are now consistent with UK GDP growth at 2.5 per cent in 2017, significantly above our economists’ forecast of 1.6 per cent.”

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