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Anyone got any thoughts on where this is going?
Currently the pound is worth 1.12 euros, way down from when 1.40 was the average exchange rate. Do we anticipate it going back up to these levels? Any thoughts when?
For sure the current rate is just about killing the Spanish tourism and property markets!
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1,40 I want it back @1,62 the rate we should have gone in when everyone else did. I can’t see it going up at the moment , in fact I’m surprised that it is at 1,12. for anyone with income or pension from the U.K. it is a nightmare.
I can’t see any reason for it to rise in fact I would have thought that until there’s an election it will remain in limbo. -
@DrRobert wrote:
Anyone got any thoughts on where this is going?
Well, if the journey to near parity with the euro has been politically manipulated to ease transition into the euro, as some commentators have suggesed, then that policy could be reversed and we might be heading towards a stronger pound and a better exchange rate with the euro.
Reason being, with the current high levels of govt debt and the prospect of rising inflation, EMU conversion criteria won’t be met for many years to come, therefore, there’d be no real mileage in maintaining a weak pound, I’d have thought, other than boosting our few exports. It’s a very complex bigger picture though.
That’s my thoughts, but what do I know? 😕
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I think the pound will bump along around the 1.10-1.15 mark for the next 2 mouths or so, when the UK starts to show growth for the last quarter of 2009 (think the figures are due at the end of Jan 2010 and surely they must show a plus ?) you may find a spike but that’s depending on all the other data flying about.
As for longer term I personally don’t think you will ever see 1.45-1.50 again, hope I am wrong but cant see it, I think 1.20-1.25 will be the level it stays at for years
As has been said the recent rise in sterling has all been down to the weakness of the Euro rather than the strength of the pound
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Sterling will rise to a value such that the industrailsed European nations have a broadly similiar costs for goods and services.
With the present imbalance it’s far cheaper to buy goods and services in the UK than in Euroland and of course this has helped the UK whilst in recession.
As an example:
If you make Audi’s in Germany and sold them in the UK for £30k before the recession, you now have to sell them for £40k to make the same profit. Clearly UK buyers will be buying UK manufactured cars otherwise they will be paying 30% more for their European built models. Or Audi losing money on UK sold cars
The other scenerio is that European countries face deflation until the costs of goods/services are balanced. But this is extremely unlikey.
For what’s is worth I think sterling will rise to around 1.20 during 2010 and then into 2011 we will see 1.30 ~ 1.35. I don’t think it will rise above this otherwise there is the imbalance that the UK is too expensive compared with Europe.
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@jp1 wrote:
Sterling will rise to a value such that the industrailsed European nations have a broadly similiar costs for goods and services.
With the present imbalance it’s far cheaper to buy goods and services in the UK than in Euroland and of course this has helped the UK whilst in recession.
Indeed, I run a business that is at the moment selling and sending French made goods to France (as well as the rest of Euroland) because of that same scenario, we buy from the UK importer and can still send and make a good profit on the goods
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@jp1 wrote:
Sterling will rise to a value such that the industrailsed European nations have a broadly similiar costs for goods and services.
With the present imbalance it’s far cheaper to buy goods and services in the UK than in Euroland and of course this has helped the UK whilst in recession.
As an example:
If you make Audi’s in Germany and sold them in the UK for £30k before the recession, you now have to sell them for £40k to make the same profit. Clearly UK buyers will be buying UK manufactured cars otherwise they will be paying 30% more for their European built models. Or Audi losing money on UK sold cars
The other scenerio is that European countries face deflation until the costs of goods/services are balanced. But this is extremely unlikey.
For what’s is worth I think sterling will rise to around 1.20 during 2010 and then into 2011 we will see 1.30 ~ 1.35. I don’t think it will rise above this otherwise there is the imbalance that the UK is too expensive compared with Europe.
What about UK deficit going over-the-top and UK needing IMF rescue and possible Pound crashing to 50 cents?
I am not saying that it is neccesarily going to happen but it has the same probability as Pound going to 1.30 ~ 1.35.
Of course Euro itself might be history in 2-3 years after Greece, Spain, Portugal and Italy would have left… Again, this is a posibility.
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@flosmichael wrote:
What about UK deficit going over-the-top and UK needing IMF rescue and possible Pound crashing to 50 cents?
Then the UK becomes the dream location for worldwide business. All European manufacturing services move to the UK as costs are more than halved. All consultancy is placed with UK companies. All software development moves back from India, China… etc etc.
The UK has full employment, sterling strengthens, and the status quo one again returns.
It’s a global economy, work (within reason) moves to the cheapest location. This was not the case 50 years ago. You cannot have indefinite currency imbalance.
I offer consultancy services. I could contract in Germany and increase my business turnover by approaching 50%. Many consultants are doing this.
The flipside is that as multinationals have reduced, postponed projects, UK projects have fared better as the more expensive (European offices) have reduced.
The pound dropping to 50 cents would see a flight of a LOT of work out of Europe and into the UK.
The fall in Sterling has not been about a weak economy, large deficit etc. It’s was a deliberate devaluation to keep work in the UK to the detriment of other countries.
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@jp1 wrote:
@flosmichael wrote:
What about UK deficit going over-the-top and UK needing IMF rescue and possible Pound crashing to 50 cents?
Then the UK becomes the dream location for worldwide business. All European manufacturing services move to the UK as costs are more than halved. All consultancy is placed with UK companies. All software development moves back from India, China… etc etc.
The UK has full employment, sterling strengthens, and the status quo one again returns.
It’s a global economy, work (within reason) moves to the cheapest location. This was not the case 50 years ago. You cannot have indefinite currency imbalance.
I offer consultancy services. I could contract in Germany and increase my business turnover by approaching 50%. Many consultants are doing this.
The flipside is that as multinationals have reduced, postponed projects, UK projects have fared better as the more expensive (European offices) have reduced.
The pound dropping to 50 cents would see a flight of a LOT of work out of Europe and into the UK.
The fall in Sterling has not been about a weak economy, large deficit etc. It’s was a deliberate devaluation to keep work in the UK to the detriment of other countries.
It is not that easy. Iceland lost 80% of their currency and people did not jump over there…
UK has first to rebuild the industry basis and not live on house price inflation and banking tricks. For the moment things go into an opposite direction, as the funds for research are cut by 25% and cutting-edge reasearch is abandoned.
To compete with India and China would mean a similar salary. Who can live in UK with £300/month?
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@jp1 wrote:
Then the UK becomes the dream location for worldwide business. All European manufacturing services move to the UK as costs are more than halved. All consultancy is placed with UK companies. All software development moves back from India, China… etc etc.
The UK is by no means a cheap destination, the pound was vastly over valued for many years, largely due to financial industry. That effect has disappeared and won’t be back for years, the banks won’t be able to make such big profits with the new Basel requirements.
The Euro is overvalued at the moment, though. I suspect the long term rate will be 1.25 and 1.6 against the USD.
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I tend to agree with jp1’s post. At the start of the year you couldn’t get in a merc, bmw, audi, dealers in the U.K. for Europeans, ordering lhd,paying in euros, 30% saving, and picking up at the factory. From the introduction of the euro the rate to the pound was set and still is 1,5/1,6 for the vast majority of goods. It is far cheaper,now, to buy whatever you require in the U.K. and even with carriage the saving is a minimum of30%. I have always checked prices against the U.K. even before the ‘crisis’ and it was always if it cost 100 pounds it was 150/160 euros here. That still remains the same.
What I would like to know peoples thoughts on is now that the Lisbon Treaty has been ratified, one stipulation is that all members have the euro. Is it possible the U.K. could be instructed to adopt it forthwith, or be thrown out?
What would be the situation then ? If Greece or Ireland pull out in 2010, as has been speculated,what would the situation be ? -
peterhun wrote:jp1 wrote:Then the UK becomes the dream location for worldwide business. All European manufacturing services move to the UK as costs are more than halved. All consultancy is placed with UK companies. All software development moves back from India, China… etc etc.
The UK is by no means a cheap destination, the pound was vastly over valued for many years, largely due to financial industry. That effect has disappeared and won’t be back for years, the banks won’t be able to make such big profits with the new Basel requirements.
The Euro is overvalued at the moment, though. I suspect the long term rate will be 1.25 and 1.6 against the USD.[/quote)
There are too many inponderables for anyone to know, most of which
have been commented on in this forum. I think a point to bear in mind which has not been mentioned here, is David Cameron and a possible conservative government. Will Cameron be like Ted Heath or Maggie?To answer my own question I fear he will be more Ted Heath than Maggie, if I am correct then the pound should theoretically drop like a stone against the Euro. If he is more like Maggie then the GBP should rocket. Against that there is the mess of the PIGS countries and Ireland, will there be a two tier system for the Euro?
Too difficult to call, the world is still in the effluent up to its neck, probably
the family pet has as much idea as anyone. -
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Joking aside I think a decisive win for Cameron’s Conservatives followed by decisive action on spending could lift sterling in 2010. The whole issue of the UK living way way beyond it’s means due to the recession and government mismanagement has been ducked pending the election. If there is a hung parliament or – horror of horrors – Labour win and then proceed to carry on spending like a drunken sailor on shore leave, the markets could pull the rug and precipitate a second sterling crash.
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This is an area which no one can comment on with any conviction. One can draw various models.
The factors are many & ever changing and not in the control of one Government.
If you need to take a decision take it as you see it. As most of the people who buy in the current cycle will be buying for the life style. The exchange rate becomes irrelevent.
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@shakeel wrote:
This is an area which no one can comment on with any conviction. One can draw various models.
The factors are many & ever changing and not in the control of one Government.
If you need to take a decision take it as you see it. As most of the people who buy in the current cycle will be buying for the life style. The exchange rate becomes irrelevent.
i am waiting to buy but with so much conflicting info about the pound and where prices in spain will bottom out decided to just put my cash in to a growth bond and wait and see if prices start to rise and the pound goes up i will be in the same position as now if the pound goes up and prices continue to fall i will be quids in (i like this senario) or if prices rise and the pound drops i lose what ever i earnt in the bond but i have sat on the fence and am waiting to see what happpens
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@dartboy wrote:
i am waiting to buy but with so much conflicting info about the pound and where prices in spain will bottom out decided to just put my cash in to a growth bond and wait and see if prices start to rise and the pound goes up i will be in the same position as now if the pound goes up and prices continue to fall i will be quids in (i like this senario) or if prices rise and the pound drops i lose what ever i earnt in the bond but i have sat on the fence and am waiting to see what happpens
If you are in no need/hurry to buy then from a personal point of view that’s got to be the best way to go, from what I see you can only gain by giving it time, you have to make the right decision for you
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Some interesting responses! Thanks!
I’m in a postion where I have a mortgage on a Spanish property that I’d like to pay off. At the moment 100,000 euros would cost me about £90,000, if I transfer it across from the UK. If the exchange rate went back to 1.40 euros, it would be £70,000! Quite a difference!
The solution, of course, is to liquidise other Spanish assets. But these assets are of greater appeal to UK buyers. Who aren’t spending because of the exchange rate! Etc etc!
Roll on David Cameron and lets see what happens!
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@DrRobert wrote:
If the exchange rate went back to 1.40 euros, it would be £70,000!
And if you Aunt was a fellah, she’d be your Uncle!
It’s interesting reading this thread, such totally opposite thoughts. Similar thing happened when I read an article discussing the same topic with execs. of various financial institutions. Likewise re. where the price of gold was going from hereon.
I think this probably sums it up best:
@135yearswaiting wrote:There are too many inponderables for anyone to know…….
And that was my “as useless as a chocolate teapot” contribution for the day. Now back to strimming the garden before it becomes an unmangeable jungle. Sun is shining and in t-shirt and shorts – what a Winter here in Greece! 😀
Christmas Eve tomorrow – a good time to wish everyone on this forum a very Happy Christmas, may you all enjoy good health and peace during the coming year.
As we’re an international bunch here (and being an avid curry-lover) thought this appropriate to jiggle everyone up and get in the festive spirit:Volume up…………
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Thanks Inez – hope it was as good for you as it was for me. 😆
Back to topic, something to throw into the cauldron of discussion:
http://www.telegraph.co.uk/finance/currency/6896334/Pound-could-soon-be-worth-less-than-euro-warns-CEBR.html -
@charlie wrote:
Thanks Inez – hope it was as good for you as it was for me. 😆
Back to topic, something to throw into the cauldron of discussion:
http://www.telegraph.co.uk/finance/currency/6896334/Pound-could-soon-be-worth-less-than-euro-warns-CEBR.htmlread this today and thought way to go gordy,all those economic migrants that came here to work who now are sitting on the dole adding to our increasing debt might get a job as the uk becomes a more inviting place to put you business which will help to pay for all those coming back without a pot.but on a personal level wondered if this would put my hopes of a place in the sun even further away or would it hinder the recovery in spain even more
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