LONDON Deutsche Bank said on Tuesday the pound could fall "much lower" versus the dollar, targeting $1.14 in the second half of this year.
Financial fair value metrics point to a much lower value for the pound the German lender said. The pound last traded at $1.2164.
"The main push back against our continued bearish GBP call is that Brexit is fully priced and the pound looks cheap against fair value metrics. We disagree," macro strategist Oliver Harvey wrote in a note to clients.
Deutsche said little progress in Brexit talks was likely before a new German government was in place in the late autumn, leaving an unrealistically short time for Britain to conclude a new relationship with the European Union.
Until a transitional deal was agreed, the market would increasingly price a cliff-edge Brexit.
The bank also maintained its recommendation of a short position on sterling versus the Swiss franc.
(reporting by Ritvik Carvalho, editing by Nigel Stephenson)