£ v €

planemad

The euro continues to grow stronger against the pound.

Its €1.26 per £1 today is the euro going to continue to get stronger and the pound weaker.
Does anyone have any forecasts for the next few months?

Would it be beneficial for the UK to join the euro if this trend continues?

Thanks in advance

ianmr65

Two massive questions. Anyone who can give you a definative and with hindsight correct answer to either is probably a billionaire, who guessed right.

In my humble view: the pound was certainly overvalued, against the euro, so a drop is probably a good thing. The Uk economy predicated as it is, largely on borrowing, and the property boom, is going to slow much more markedly than polititians would have you belive, and much more than the rest of euro land except for spain and ireland. The UK is looking down the barrel of a major recession. The property slide will turn into a US style crash, next year. Expect about 20% drops in house values. If Merv takes his lead from Ben bernake, expect that inflation targets will be forgotten, that we start to print lot's more money, and that intrest rates will drop markeldy.
The alternative, would be much tighter monetary controls, rising intrest rates, and mass unemployment, I really can't see either party going with that approch again, for decades to come, as the middle classes would bear the brunt this time.

The Big EU economies are not as dependant on property and have the benefit of strength in numbers. I think that the £/euro slide will continue for a while yet. So Plan your hoildays in florida, rather than marbella.

The Pound was shadowing the euro, for a long time, as a precursor to entry, but the gov have abandoned that approch, and the economic impact of the UK entering the euro would be bloody, in terms of getting back to parity. Especially if we are in a much deeper recession than the rest of euroland. so i don't see it happening.

Milarky

ianmr65 wrote: »

The Pound was shadowing the euro, for a long time, as a precursor to entry, but the gov have abandoned that approach, and the economic impact of the UK entering the euro would be bloody, in terms of getting back to parity. Especially if we are in a much deeper recession than the rest of euroland. so i don't see it happening.

By returning to 'parity' do you mean the range the pound has formerly been quite close to before the recent slide (say 1.50EUR>1£ >1.30EUR) so we'd have to settle for a lower permanent exhange rate prior to fixing (1.20EUR>£1>1.10EUR say)?

frogman_2

I agree with ianmr65 with the statements that if you knew what was going to happen over the next 6-12 months, you'd be on the spread betting websites like a shot!

However, for me, it has been more an issue of £ v € v $. In brief, the euro has been hugely undervalued, the pound was relatively strong and the dollar (for decades the currency of global trade) is looking extremely vulnerable. The Eurozone has been a relatively strong economy over the last 10 years and looks like it out-perform both the UK and the US over the next 2-3 years. I think the ECB will be under pressure to track UK & US interest rates downwards but I can see €1 = $2 and £1 = €1 being reached in the next 2-3 years...before the UK & US economies have a chance to recover.

There is a huge difference between UK and US outlooks. This might be contentious, but the UK is nowhere near recession (the technical definition, that is) but the UK economy will definitely slow and, at some stage, will come to a realiasation that it's long-term future may lie coupling with Greater Europe & BRICKs rather than the US.

Still won't mean anyone biting the bullet on joining the euro though...;)

ManAtHome

Dunno - I think the euro is now over-valued. Possibly in a reasonable range for northern europe, but the southern bit (and possibly the eastern bit) is going to cop some serious pain at current rates.

ianmr65

Milarky wrote: »

By returning to 'parity' do you mean the range the pound has formerly been quite close to before the recent slide (say 1.50EUR>1£ >1.30EUR) so we'd have to settle for a lower permanent exhange rate prior to fixing (1.20EUR>£1>1.10EUR say)?

Not really. For a long time the pound and the euro movements against other currencies stayed very close. So we maintained the approx 1.4 euro /pound. and they both moved in parallel against say the dollar.
To get parity it was not necessary to devalue one or the other. Just have them move the same way. The parlance at the time was 'tracking' the euro.

ianmr65

frogman wrote: »

There is a huge difference between UK and US outlooks. This might be contentious, but the UK is nowhere near recession (the technical definition, that is) but the UK economy will definitely slow and, at some stage,
...;)

I agree with frogman in as much as we are about a year behind the US. So the serious downturn here is still someway off: But all the indications are that where we are now, bearing in mind the analogous and underling weaknesses, is a very similar place to where the US was about a year - 18 months ago.