How far will Sterling be allowed to fall?

GooeyBlob

Well, the government is having trouble raising money from gilts because the UK is in a far worse position than any comparable country. Alas, foreign investors have as much faith in Brown as do German politicians.

Despite all the talk about "hard-working families", politicians of all sides - and Brown in particular - are only concerned with winning the next election now. Labour are borrowing obscene amounts of money to throw around willy-nilly to buy votes, and the Tories dare not criticise too much because they're scared it would cost them votes to do so. Yet we know we will all have to pay for this spending frenzy in a year or so when we least need the extra taxes.

It is complete and utter madness.

purch

But it rather implies that someone at the top could still be in control of our currency

Quite...

They are never really in control of the value of the currency (not just the UK Government but all Governments)

Interest rates are only a very small part of the equation, and over the medium term interest rate differentials are irrellevant.

In terms of Purchasing Power Parity the GBP/USD should probably be around the 1.60/1.70 range, (far lower than the ludicrous 2.05 we had earlier this year), and against the EUR around 1.30/1.35

If it moves too far away from this then clearly sonething is wrong.

The markets have no confidence in the U.K. Government, and there is very little they can actually do to regain that confidence, or arrest the slide.

buglawton

We might be tempted to think that this low £ will bring investors into Britain to employ our cheaper labour. Unfortunately those same investors will feel there's risk of a £ bounce back - it's a very bouncy currency now that it's so small in footprint compared to the Euro.

Is it TIME TO JOIN THE EURO?

baby_boomer

Recognising their own impotence, now that they have borrowed so many extra £10bns, the government line, according to Treasury Minister Yvette Cooper (Mrs. Ed Balls) is that the government is simply not responsible for the £'s exchange rate levels.

What an excellent way of avoiding criticism :rotfl:

Telegraph

"...Instead, the Government would concentrate fiscal policy on keeping inflation under control and supporting the economy through the downturn..."

And if the foreign exchange markets think our economy is a future basket case, so be it .

buglawton wrote: »

.Is it TIME TO JOIN THE EURO?

I think not. Then German lectures about our fiscal irresponsibility would have to be listened to.

And it would be political suicide for Gordon.

aqueoushumour01

buglawton wrote: »

We might be tempted to think that this low £ will bring investors into Britain to employ our cheaper labour. Unfortunately those same investors will feel there's risk of a £ bounce back - it's a very bouncy currency now that it's so small in footprint compared to the Euro.

Is it TIME TO JOIN THE EURO?

would we really want to go in now with sterling as low as it is - we'd all be worse off. I'd rather get 1.5 euros for each of my pounds than just over 1!

In any case, let's look at what the situation would be like had we gone into the eurozone. Would anything be much different economy wise? Look at France, germany, spain...all have got similar problems. Now, if we were in the eurozone, we wouldn't be able to decrease rates to at least try to get out of this mess. We'd only have government spending. We'd have no currency to weaken so even less flixibility - at least exporters will help a bit (albeit no by a lot). It's in times like these that the euro doesn't seem at all attractive.

handful

Jim_B wrote: »

Allowed to fall? Is someone going to watch it reach a certain point and then magically stop it? Like the Tories did to stop the pound crashing out of the ERM? In the same way that house prices weren't allowed to crash?

I wasn't suggesting that anyone can magically stop it, just wondering if there would be change of focus from trying (and failing) to control inflation to trying (and failing probably) to protect the value of the pound.

purch

just wondering if there would be change of focus from trying (and failing) to control inflation to trying (and failing probably) to protect the value of the pound

Raising interest rates will have no effect, in fact probably have a negative effect.

The only way the currency can be protected in by adopting a sensible and prudent :rotfl: fiscal strategy, for the medium to long term.

free4440273

Looks like for gbp/usd, the worst could be over; when u consider eur/gbp, the fundamentals for UK don't look too good (worse to come perhaps)

setmefree2

free4440273 wrote: »

Looks like for gbp/usd, the worst could be over; when u consider eur/gbp, the fundamentals for UK don't look too good (worse to come perhaps)

Oh Goody :j:j:j:j

That's how it works on this board isn't it?;)

Oh were all doomed:rotfl::rotfl::rotfl:LOL:j:j:j

free4440273

setmefree2 wrote: »

Oh Goody :j:j:j:j

That's how it works on this board isn't it?;)

Oh were all doomed:rotfl::rotfl::rotfl:LOL:j:j:j

OK, to wit: Sell GBP/USD!!!:p