Pound Slips Below Euro

[liberalpragmatist]

http://www.guardian.co.uk/business/2008/dec/14/euro-economic-policy-currencies-europe

The government is facing a growing backlash over its rescue package for the economy after the pound slumped to below parity with the euro on British high streets and at airports for the first time since the single European currency was launched a decade ago.

Sterling's decline to a value of less than a euro, after commission charges, is seen by economists and opposition politicians as a pivotal 'psychological moment' - and evidence of declining faith in the British economy on global currency markets.

...

Cable argued that sterling's vulnerability strengthened the case in the medium to long term for the UK to be 'locked into a bigger currency block' - meaning entry into the euro. The case for euro entry was also put by leading economist and commentator Will Hutton. 'The pound buying less than a euro is an important psychological moment. Britain first doubted the euro would be launched, then whether it would survive, then whether it would ever become a serious currency,' said Hutton.

'Even today people are rushing to pronounce its death warrant. Now it is plainly the world's second currency after the dollar. As the pound becomes more volatile and less valuable, the euro will be seen increasingly as a safe haven - a zone in which both British industry and the City of London would flourish. The question is not if Britain will join, but when - and how many working lives and businesses will be wrecked by ideological opposition before it does.'

[T_i_B]

1. When the pound was strong...

...the exact same people were calling for Britain to join the Euro to get us out of the bad points that a strong currency brings.

And now that sterling is weak that lot are trying the same trick of calling for entry into the Euro as a supposed way to get rid of the bad points of having a weak currency!

I'm sorry but I just don't buy it. And the Europhiles still habve a major problem in that a referendum on Euro entry would still result in a No vote anyway.

[Albus]

4. I agree, and further, if you look at the value of the pound against the dollar

you find that it is around it's long term average at present.

There is no long term track record on pound euro exchange rate for comparison but I wonder how it would compare to the old deutschmark rate?

[D-Notice]

2. All it shows is how much of a rip-off

those places on Oxford St are.

I was in Croydon town centre on Friday and the rate was being advertised at around £1:€1.10

[Anarcho-Socialist]

3. it's a shame that monetarism decimated Britain's manufacturing

because this would have laid groundwork for an export-led recovery.

I think Vince Cable is correct in his assessment of why the Pound is so low, that of the vast cuts in interest rates means holdings in Sterling are much less attractive, while our housing bubble is more profound than that in the Eurozone.

I think the overall diversified economy of the Eurozone will mean a stronger Euro in the long-term.

I'm not convinced Euro membership would mean Britain being significantly better off though. Creating employment, reducing the wealth gaps (gender, race and class) and sustaining social justice programmes are more important to creating a healthy economy.

[Albus]

5. Hmmmmm

"I think Vince Cable is correct in his assessment of why the Pound is so low, that of the vast cuts in interest rates means holdings in Sterling are much less attractive"


ECB rate - 2.5%
BOE rate - 2.0%
Fed rate - 0.5%

doesn't exactly square with what you say does it?


"A weak currency is the sign of a weak economy,
which is the sign of a weak government"

Gordon Brown, 1995

[Anarcho-Socialist]

7. actually yes it does

Remember the Pound as a reserve currency is bare compared to the Euro and the Dollar. Other currencies usually require much higher interest rates than these to appreciate as the Euro and Dollar benefit from seigniorage extensively. The fact remains that if Sterling rates were still 5%, it wouldn't be weak as it is now, but other economic fundamentals as I noted above also affect the value of Sterling.

[enlightenment]

6. Well, if the Euro is

"Now it is plainly the world's second currency after the dollar" then I'd say it has some serious issues, since the dollar is weaker than the pound.

(and the Euro doesn't look stronger than the pound according to this, anyway . . .)

Base Currency: US Dollar, USD on Sunday, December 14, 2008

Currency Code USD/1 Unit Units/1 USD
Euro EUR 1.339 0.7471
British Pound GBP 1.488 0.6723
http://www.oanda.com/convert/classic