Cable is down 149 pips to 1.1461 today but Deutsche Bank thinks it's just the beginning of a new leg lower.
They argue that GBP/USD will fall to 1.080 and EUR/GBP will rise to 0.8800.
"The UK's external financing needs remain large and, on current market pricing, real yields are still too low compared to other major currencies, which all else equal leaves the likely trend in the pound lower. What's more, we see the risks skewed towards the BoE sounding dovish this week and ultimately underdelivering vs current pricing," they write.
An interesting part of the note highlights how sterling has stopped getting a benefit from higher-than-expected inflation prints. That's an interesting trend that isn't just UK-specific. Today and on Friday, the euro has declined despite hot inflation data.
For Thursday's Bank of England meeting, they expect a 75 bps hike but one that emphasises downside risks to growth and pushes back on market pricing.
