£terling and $ollar crashing against the €uro

[orangeman]

I read in the Times today that to change money in London Pancreas Station yesterday, you got € 1.03 to the £.

[the Deel Rover]

I read in the Times today that to change money in London Pancreas Station yesterday, you got € 1.03 to the £.

off topic i know but that train station is more like a huge shopping cente tis a fine building

[orangeman]

Pound in another record euro low 
 


See live pound v. euro rate
The British pound has continued its sharp decline against the eurozone currency reaching a new record low of 1.1314 euros on Thursday.

It is the lowest level since the euro was launched in 1999.

Sterling was pushed lower after figures from the Confederation of British Industry confirmed a sharp downward trend in manufacturing.

Meanwhile, the pound gained one cent against the US dollar, edging at $1.4924 in mid-afternoon trading.

The UK currency is expected to remain under broad selling pressure amid a grim outlook for the British economy.

Interest rates have been cut both in the UK and in the eurozone, but they remain higher in the 15-member euro currency area.

The Bank of England has made two sharp cuts in rates, bringing them down to 2%, and many analysts expect more in the pipeline.

Lower interest rates make it less attractive for foreigners to hold pounds.

A weaker pound is better for the UK exporters but is bad news for British holidaymakers who plan to go abroad during the Christmas season, and also makes imported goods more expensive.

Some currency dealers are expecting that the pound will approach parity with the euro by the end of the year

[orangeman]

The pound has touched an all-time low against the euro - meaning that the eurozone currency is now worth just under 88 pence.

Euro notes and coins were physically introduced in 2002, although the currencies of the initial 11 member countries were first joined in 1999 when their value was fixed in euro terms.

There are now 15 eurozone countries, with a total of 320 million inhabitants.

But why is the currency so strong now and what does it mean?



--------------------------------------------------------------------------------

Why is the pound struggling?

Investors have been losing faith in the UK economy which now seems to be moving rapidly towards recession.

The trouble in the credit markets seems to have hit the UK harder than other countries, especially as the financial sector accounts for a bigger part of the UK economy.

And with consumers having borrowed heavily in the good times, and the government now facing a huge budget deficit, currency traders were in no doubt that the UK economy was in trouble and the time to start selling sterling had arrived.

Another reason is that the Bank of England has cut interest rates in the UK from 5% to 2% in the space of just three months.

Rate cuts generally encourage investors to switch to other currencies which have a higher rate of return.

Why is the euro doing so well?

Given the weakness of the pound, there has been a flow of money into the euro.

The euro is an increasingly attractive currency for investors compared with its rivals - not only the pound, but also the US dollar.

And the European economy, while showing undeniable signs of being gripped by slowdown, is less burdened by debt than the United States or the UK.

The lower size of government deficits, the lower expectations for inflation, and the higher interest rates paid by the European Central Bank have also made holding the euro more attractive.

What will the impact be people taking holidays in Europe?

Well, your pound will not buy as many euros, making things more expensive for you.

And this week, some outlets were only offering 110 euros for every £100 you wanted to exchange.

However as regular travellers between the UK and the continent will attest, the euro has been edging higher for some time.

But the price of a baguette at the boulangerie, an espresso on a Milan pavement cafe or a beer in a Spanish bar may come as a shock for anyone who has not been to Europe for a while.

While a euro is worth about 88p now, it was worth 71p at its physical launch in 2002 (and 57p on foreign currency markets during its all-time low in 2000).

But how about the broader economy? What will the impact be?

Overall, a strong euro is good for the UK economy.

It makes imports from the eurozone more expensive, while UK exports become cheaper to those paying for them in euros.

This is clearly a boost to the UK manufacturing sector in these difficult times.

The eurozone accounts for about 60% of UK exports.

However, if the pound was to fall too sharply, it could lead to imported inflation, as the price of goods from abroad would rise.

Can we expect parity between the euro and the pound soon?

Some currency analysts are speculating that by the end of this year or early next year, we may be headed for parity, where one pound buys just one euro.

However, with the downturn set to grip continental Europe, others expect the euro will weaken.

One key factor is whether the Bank of England continues to cut interest rates more quickly than the European Central Bank.

Does the strength of the euro bolster the case for the UK to join the currency?

This argument is shrouded in politics and patriotism, as well as economics.

One drawback is that the European Central Bank's interest rate applies equally across all 15 eurozone countries, whether their economic growth levels are sluggish or breakneck.

But the euro has many things in its favour, especially when it is at such highs, by helping to keep inflation under control.

And while the dollar is gaining strength right now, even the former head of the US Federal Reserve, Alan Greenspan, has said that it is conceivable that it will one day "replace the dollar as reserve currency or will be traded as an equally important reserve currency".

There is also a strong argument that joining the euro would help lure more foreign investment.

And while many eurozone residents also expressed opposition to the euro when it was introduced, it is proving popular with citizens as well as business, especially those involved in cross-border trade

[armaghniac]

€1 = £0.8927 anois
IR£1 = £1.1335

[Donagh]

Looks like the Yanks have hit the panic button by cutting interest rates to 0% and the big investors pulling out and putting it into the Euro for better returns with the result that the dollar will fall and Euro climbing. Good for those planning trips to the US but bad news for the exiles and US companies based in here as the cost base expands and the south becomes even less competitive. I'd also think that this will add to the deflationary pressures as the price of oil drops even futher and so the Brits will keep interest rates low to and let sterling go further against the Euro. It's hard to see what the southern government can do since the setting of monetary policy is no longer within their gift.

[orangeman]

Looks like the Yanks have hit the panic button by cutting interest rates to 0% and the big investors pulling out and putting it into the Euro for better returns with the result that the dollar will fall and Euro climbing. Good for those planning trips to the US but bad news for the exiles and US companies based in here as the cost base expands and the south becomes even less competitive. I'd also think that this will add to the deflationary pressures as the price of oil drops even futher and so the Brits will keep interest rates low to and let sterling go further against the Euro. It's hard to see what the southern government can do since the setting of monetary policy is no longer within their gift.

It's just bad news all round - it's a bit like getting on a new roller coaster for thr first time - there's so many unexpected twists and turns and you just don't know where you're going to end up.

[orangeman]

92p at the minute ! 

[mylestheslasher]

Bad news for anyone working for a company with a high percentage of it sales going into the UK. Good news for southerners heading north to shop.

[bailestil]

92p at the minute ! 

glorious stuff. The higher the better.
Only downside is the cheap crossborder petrol must be no more now.

[Donagh]

glorious stuff. The higher the better.
Only downside is the cheap crossborder petrol must be no more now.

Not so glorious if it puts you out of a job.

[orangeman]

We need stability and there for a currency to lose 20% of its value on a few months is not good news.

Ok, the weak pound might help in the short ter, in the longer term it can't be good news.

There has to be a balance that allows both sides to derive a benefit.

There's only so much shopping the southerners can do in the North and only so much benefit this can do to the Newry economy.


But what about the poor retailers in the border counties and beyond ?? They're f--ed !

[armaghniac]

Only downside is the cheap crossborder petrol must be no more now.

the petrol will even up to some extent as it is partly based on the oil price in dollars.

Changes of this magnitude will wreck a lot of people's jobs. For example the motor trade in the south is in tatters as you can now import a used car from the UK for much less. Consequently you cannot sell a used car in the 26 counties, and so car dealers don't want trade ins, which doesn't help what is left of the new car market either.

The only good long term outcome of this would be if the UK joined the Euro.

[orangeman]

Only downside is the cheap crossborder petrol must be no more now.

the petrol will even up to some extent as it is partly based on the oil price in dollars.

Changes of this magnitude will wreck a lot of people's jobs. For example the motor trade in the south is in tatters as you can now import a used car from the UK for much less. Consequently you cannot sell a used car in the 26 counties, and so car dealers don't want trade ins, which doesn't help what is left of the new car market either.

The only good long term outcome of this would be if the UK joined the Euro.

What are the chances of that happening in all honesty ??

[delboy]

Zilch, in the short term.