GBP: Small growth points towards Sterling weakening – Commerzbank

When and how rapidly the British economy will recover is relevant for the evaluation of Sterling. Therefore, economists at Commerzbank expect GBP weakness ahead. 

The British malaise

“A country that does not attract investment will be unable to grow as rapidly as regions where total capital is growing or maintained at constant levels medium- to long-term. And if growth is smaller real exchange rates towards dynamic currency areas are also likely to principally fall.”

“Quite apart from what the Bank of England will do or avoid in the foreseeable future due to the weak economy and quite apart from what British chancellors got wrong or will get right now, in the future or in the past, this factor in itself points towards Sterling weakening.”

“One thing seems to be reasonably clear after all: this government is not likely to reverse the decision in favour of a hard Brexit in a major way. I am not an expert on British politics, but it seems to me that no Tory government will be able to move away from a hard Brexit without having to fear losing votes.”