Deutsche Bank Sells Pound as Energy Prices Weigh on Sterling

Deutsche Bank has shifted its strategy on the British pound, advising clients to sell. Analysts at the investment bank have been bearish on sterling since September 22, citing a softer domestic and external backdrop.

The decision is based on several factors, including higher energy prices eroding the improvement in the trade balance, reducing fiscal headroom, and weighing on foreign gilt inflows.

The Bank of England's dovish policy stance is also contributing to the change in strategy. Strategists expect the Bank to deliver 'dovish hikes', which are rate increases accompanied by warnings that no further hikes will follow, ultimately lowering the forward-looking rates curve.