why is pound so poor against the dollar?

starchick

I will be travelling to the states for a second time within a month. 2 weeks ago the exchange rate was terrible, 1.4-1.6 dollars to the pound. I managed to get mine at 1.6. Now I am travelling again and the rate is even worse, 1.4 dollars to the pound.

WHY IS THE POUND SO POOR AGAINST THE DOLLAR? I thought that the US was in a worse financial state than the UK. I cannot understand this. Is it likely to get better? I remember the good old days when it was 2 dollars to the pound...

Any advice or enlightenment would be appreciated.

meester

starchick wrote: »

I will be travelling to the states for a second time within a month. 2 weeks ago the exchange rate was terrible, 1.4-1.6 dollars to the pound. I managed to get mine at 1.6. Now I am travelling again and the rate is even worse, 1.4 dollars to the pound.

WHY IS THE POUND SO POOR AGAINST THE DOLLAR? I thought that the US was in a worse financial state than the UK.

You thought wrong. In the 70s the Labour party destroyed the manufacturing competitiveness in Britain, now it's the turn of the banks. The Americans still manufacture loads of things. Our cupboard is bare.

I cannot understand this. Is it likely to get better? I remember the good old days when it was 2 dollars to the pound...

We are in Britain's worst ever recession. What do you expct after 11 years of a Labour government? They ALWAYS devalue the pound.

It's not likely to improve while rates keep falling.

Voyager2002

As a matter of fact, it was Mrs Thatcher (Conservative) who destroyed the manufacturing sector of the UK economy. It was only the revenues from North Sea oil that prevented us from going completely bankrupt during this period. At that time the pound-dollar exchange rate came within a few cents of parity (one dollar for one pound).

The current Labour government got us out of recession, and has presided over the longest economic boom in recorded history. The current weakness of the banking sector is being addressed effectively. Sterling has adjusted to a realistic exchange rate, enabling British business to be competitive on global markets. Only the unpatriotic remarks made by a disreputable Conservative politician (George Osborne) have distorted the markets and taken the pound to a value lower than would be justified by the fundamental. I am confident that once Labour has won another election victory the pound will return to its former glory.

meester

Voyager2002 wrote: »

As a matter of fact, it was Mrs Thatcher (Conservative) who destroyed the manufacturing sector of the UK economy. It was only the revenues from North Sea oil that prevented us from going completely bankrupt during this period. At that time the pound-dollar exchange rate came within a few cents of parity (one dollar for one pound).

The current Labour government got us out of recession, and has presided over the longest economic boom in recorded history. The current weakness of the banking sector is being addressed effectively. Sterling has adjusted to a realistic exchange rate, enabling British business to be competitive on global markets. Only the unpatriotic remarks made by a disreputable Conservative politician (George Osborne) have distorted the markets and taken the pound to a value lower than would be justified by the fundamental. I am confident that once Labour has won another election victory the pound will return to its former glory.

Hahahaha. Excellent troll. You had me up to the 'unpatriotic remarks bit'.

You could have gone with 'won another glorious election victory'

wdyw

Voyager2002 wrote: »

As a matter of fact, it was Mrs Thatcher (Conservative) who destroyed the manufacturing sector of the UK economy. It was only the revenues from North Sea oil that prevented us from going completely bankrupt during this period. At that time the pound-dollar exchange rate came within a few cents of parity (one dollar for one pound).

The current Labour government got us out of recession, and has presided over the longest economic boom in recorded history. The current weakness of the banking sector is being addressed effectively. Sterling has adjusted to a realistic exchange rate, enabling British business to be competitive on global markets. Only the unpatriotic remarks made by a disreputable Conservative politician (George Osborne) have distorted the markets and taken the pound to a value lower than would be justified by the fundamental. I am confident that once Labour has won another election victory the pound will return to its former glory.

Psstt.... the largest quarterly increase in UK manufacturing in the last 20 years came under the Tories in the early 90's and we just equalled the longest period of a fall in manufacturing output since the year after Maggie came to power - as soon as the next set of figures comes out, we will surpass that.

Hate to break it to you but when Blair came to power in the late 90's the country was in such a good state with every economic outlook being positive, that even the Lib Dems could have seen the country successfully through the "boom" period.

markelock

I thought it was something to do with the french?

however it's interesting that the reports of financial crisis in the US, don't mean that the dollar falls equally with the pound and therefore the rate drops cancel each other out?

starchick

thanks for replying to my question, but I am puzzled. Like Markelock, I thought that the economic crisis in the US is worse than that being experienced here and that both currency values should be in proportion to each other. (Apologies for my lack of financial jargon-this is not my field).

It was only early this year that you could still get 2 dollars to the pound and my understanding is that our ecomomic problems are as a direct result of the sub-prime lending market in the US, so I still do not understand why the dollar is stronger than the pound.

meester

starchick wrote: »

thanks for replying to my question, but I am puzzled. Like Markelock, I thought that the economic crisis in the US is worse than that being experienced here and that both currency values should be in proportion to each other. (Apologies for my lack of financial jargon-this is not my field).

It was only early this year that you could still get 2 dollars to the pound and my understanding is that our ecomomic problems are as a direct result of the sub-prime lending market in the US, so I still do not understand why the dollar is stronger than the pound.

Our economic problems are a result of a much WORSE lending market than the US. The US provided the stimulus, but fundamentally we are in a much bigger bubble with more expensive house prices, a far weaker narrow-based economy, and also the pound does not have the reserve status of the $ (given falling commodity prices).

Basically the reason the pound was high was higher interest rates.

Essentially, if you have $100 and the US is offering 3% and the UK 5%, then you can sell the dollars for pounds, and get a better return. But now rates have fallen to 3% with further falls in prospect, the pound is worth less, as the annual return is much lower than it was looking like it would be just a month or two ago.

starchick

Thank you Meester-that explains it well.

mitchg

It also has something to do with the jokers in chaarge running our country opening their mouths saying how bad a state we are in. That was basically the final straw since then the rot in the exchange rate was hightened and speeded up. And expect it to get worse i would guess down towards the £1-$1.35 mark.
As stated we do not manufacture anything of note, we are a banking and insurance center so hence a bigger problem here. Also expect house prices to drop to levels on almost 10 years ago. Not a bright future is it, or for the next 6 -18months at least.
But on a brighter note if you have some cash next summer will be the time to buy a property with interest rates will be a record low levels add that to low house prices time to buy. But you will probably need a hefty deposit of 30% to get the best deals and expect the original mortgage deals of 3.5 or 3+1 to kick in.

Voyager2002

wdyw wrote: »

Psstt.... the largest quarterly increase in UK manufacturing in the last 20 years came under the Tories in the early 90's and we just equalled the longest period of a fall in manufacturing output since the year after Maggie came to power - as soon as the next set of figures comes out, we will surpass that.

Hate to break it to you but when Blair came to power in the late 90's the country was in such a good state with every economic outlook being positive, that even the Lib Dems could have seen the country successfully through the "boom" period.

Your comments miss the point. Britain was the world's first industrial nation, and up to the time when Mrs Thatcher came to power manufacturing industry was the key component of our economy. Government policies under her rule effectively destroyed most of the UK's manufacturing base, reducing this sector to an insignificant segment of of our economy. Hence, changes that were large in percentage terms (such as the increase from a very low base in the early 1990s, and the recent fall) are actually rather small in relation to the economy as a whole, and in terms of absolute numbers.

I agree that Britain was entering a period of economic recovery in 1997, but I doubt whether the period of growth would have been so large, and sustained for so long, had it not been for the very high calibre of economic management that labour provided.

And just for the record, I am not biased. I used to belong to the Labour Party, but left in 1988 and have never felt that I would be welcome to re-join. I think their politics stink, but I have to admit that they are very good at running a capitalist economy.