So I know very little about economics and see the papers full of Sterling at lowest level since whenever.
Now here in Ireland this means the Euro is going up and so exports to the UK become more difficult.
So by and large do the positives outweigh the negatives for a falling currency. Who actually loses?
(This isn’t a proxy Brexit thread, by the way, I’m genuinely interested in the impact falling Sterling has on you all in the UK).
.sjb
It all seems paradoxial to me - as a consumer imports are more expensive, UK sourced items stay the same unless affected by imported parts/components. Were I a business exporting it’d be great.
Most of the media are focussing on the hit that UK holiday-makers are experiencing when travelling abroad (well, apart from eastern Europe and Turkey).
I suspect in the medium/longer term imports will be more expensive and that will feed through to pushing up inflation in the UK.
The answer lies in “why is sterling falling”. At the moment it is because investors are worried about a hard BREXIT which they believe will create a recession and to stimulate an economy from recession you lower interest rates and hence your currency weakens (investors sell the lower interest rate currency and buy a higher interest rate currency and hence the move). So to answer your question, it depends if you have GBP as your currency or not, if you do and they above plays out, yes it is negative due to the recession.
I get my payments in GBP which I convert to Euro. I assume many people have combined GBP/EUR accounts.
The pound dropping in value is never good what ever the cause for UK citizens. I guess for the rest of Europe and US it’s a benefit. So it’s swings and roundabouts.
How is it good for US and EU if it makes our exports more expensive and therefore uncompetitive?
.sjb
Whilst it makes materials/components we import more expensive the overall impact is that exports to these markets become cheaper/better value because of our weak currency
Precisely, it’s all a balance for consumers/exporters, extremes one way or the other are not generally helpful across the board but will benefit say foreign travle if th epound is high or major exporters if the pound is low.
There will usually be winners and losers.
Are you asking from the point of view of an Irish Importer, Irish Exporter, Average Irishman, or perhaps a UK average citizen or perhaps a UK car maker…or …or ?
To answer the title thread it is neither positive nor negative overall. It is however temporary.
Well at least my SN3 & NDX2 will be cheaper! 0.92 today, it’ll be interesting to see how far it goes
UK average citizen.
.sjb
Not sure who is an UK average citizen…
Overall whether bad or good depends on the balance of things one buys that by import, or that have been imported, or contain significant parts that have been. For a large proportion of consumer items that more than likely applies. UK doesn’t produce anywhere near as much food as it consumes, so food prices rise. Petroleum fuels likewise. Foreign travel also becomes more expensive. And all these have become more expensive, and quite sharply so, over the past three years. So I guess the to the average citizen the falling pound is not good.
Against export businesses will do better (provided their production costs are not so adversely affected as to cancel out any benefit), to the benefit of their owners, and possibly staff.
There is also the consequences of what the Government does about it. It’s a highly unstable situation and could collapse which would bring all sorts of new problems for everyone in the UK.
A retired and eminent former city of London currency markets expert on Radio 4 yesterday said that currently at least 80% of the currency fall is down to the raised concern that a No Deal B was more likely and a second expert thought that was high but at least 50% was the same cause. The implication is that once B has happened either it will be with a deal in which case stifling will bounce back or it will be with No Deal but most of the uncertainty being removed quite quickly. The implication was that it will settle somewhere stronger than it is now although it is likely to go down further before it goes up.
All of these things are important if, like me as a proxy for an average citizen, you want to decide whether to buy a foreign currency now for a trip next year. So should I buy South African Rand now or is to late and I just have to let the 31 Oct go by and buy after that?
Best
David
Best
David
My prediction is that the most likely exchange rate in the event of no-deal would be £1.00 = $1.00, and that is indeed a very good news for the Naim users in the US.
The nuts and bolts are that the UK is getting poorer in comparison with the rest of the world. If you bought and sold just the things you make, then there’s no reason for concern. If you’re part of a very complex international web of interrelationships then it’s not quite so good. Some will win, some will lose.
Winners are probably exporters of goods manufactured in the UK without foreign input. Losers are expat pensioners in Spain who’s food prices are increasing (assuming they get paid in £££’s?).
Totally negative impact, ie an utter disaster.
Foreign confidence in the ££ is reduced, ie we might not be able to pay our debts and everything we import, eg much of our food, will cost us more.
Very little chance of home based, new start manufacturing or foreign investment.t
Surely it is about what it indicates ie low confidence in the UK economy. That will be reflected in lower investment etc.
Also oil is priced in dollars and those additional costs feed in to the economy in multiple ways, not just fuel prices directly.
Bruce
100% - I have a few investments in UK & overseas. I’m now getting better returns outside UK & the value of those has grown further/faster, some significantly so.
I fear the UK is on a slide to become the poor-man of Europe. The next year - not necessarily 31st Oct - will start to show the actual trend.