How low will Sterling go?

#1
For the financial gurus on ARRSE.

Why in the last weeks has sterling devalued so much.?

Is it at risk of a "large-scale devaluation". ?

Short term 2-3 months or is sterling down the tubes long time?
 

Grumblegrunt

LE
Book Reviewer
#2
currency is cyclic at the moment the markets are pushing for it losing its triple A because they have bet against it, others are upset because they cant make easy money on the disaster that was quantative easing.

our status within the EU isn't helping matters nor the fact that the chinese and others have stopped trying to replace the dollar as the reserve currency. they don't want it but nothing is strong enough to replace it - that and everyone who does seems to be ousted from power.

the current theory I've been reading is there will be a currency war this year in a race to devalue.
 

Travelgall

MIA
Kit Reviewer
#4
Sterling has been traditionally rangebound between 1-1.40 and 1-1.60 historically. It went nuts and got up to above $2 to the pound back in 2009, but that was an aberration. If it drops below 1.40 then we start having raw material issues. But the markets don't believe QE will end in the UK, whereas the US is out of recession sooner than us so will no longer need to print more money.
 
#6
All very interesting but, the burning question is, how many pints to the Canadian dollar when I come back for the AvN in April?
The other posts seem to sum it up very well. Some commentators think your (Canuck) currency is one of the suggested favoured ones to hold, so it should buy about two sips more than last time you came over.
 
#7
To actually answer your question, however, it would appear to be a political decision. The current race-to-the-bottom is, like all political decisions, short-term and senseless, except as a means to push the value of some other investments higher.
 

Grumblegrunt

LE
Book Reviewer
#8
so far QE has devalued pension pots by a trillion or so and low interest rates have destroyed savings and stopped banks from lending to businesses.

rbs should have been totally nationalised then split to be a govt lending bank like tsb used to be.
 
#9
Now that I am here and earning in bloody pounds, the value is poor. I remember visiting the UK back in '07 and it was eye wateringly expensive, the other way round. I hate my financial god!
 
#10
I do hope it goes down to parity. I pay just shy of a grand a month (pounds) in Child Support, but get paid in USD. So every change of 10 cents means $100/mo in or out of my pocket. Parity would be nice. $2.09 was crucifying.
I hope it does eventually - after I finish my work assignment here. :)
 
#11
Well it better keep falling as the UK is heavily indebted not just in the public but pretty feckless private sector and that's mostly denominated in Sterling. This will screw those who were prudent (or daft) enough to have saved while everybody else was remortgaging their over valued house to buy keck they didn't need but life isn't fair.

With No 11's economic policies failing (actually the whole thrust of UK PLC''s Finance sector policy of the past few decades has failed) and no debt destroying growth in prospect GB is also looking like a riskier bet to markets and the ratings agencies. This can make getting the credit the UK needs to doing anything about growth very expensive.

Osborne has spent a couple of precious years digging his political grave largely because of a moral story of a return to Swabian virtues the Brits never actually had but Tory voters largely ignorant of the scale of the systemic failure that had befallen them liked, for blame in this fiction lay elsewhere. Not that his shadows in the opposition were much less deluded with their rather similar vision of a return to the credit rich golden years of British Banking.
 

Grumblegrunt

LE
Book Reviewer
#13
newsnight doing a thing on currency wars tonite
 
#14
Cable (GBPUSD) has ranged between 15235 and 16760 since July 2011, propped by positive inward cash flows because UK securities were seen as a relative safe haven (at least in Europe). It is, just, trading within that range, but there are few signs of exhaustion, so, technically, we may see it breaking out to the downside. There is support at 15000, 14780, 14230 and strong support around 14077, then the all time low at 13500.


Now that all is sweetness and light in Euro la-la land, the pound's relative safe haven status has gone. There has been a big sell off of UK securities in the Gulf, which has really smacked the pound and the big boys are driving it down now. I don't see any great fundamental reason for it to reverse any time soon; more QE and the loss of AAA status will only accelerate the move.

How low can it go; well if it closes lower than 15325 tonight, expect to be in the 14s next week. Who knows where from then on? There is bugger all the government or BoE can do to halt the slide; the markets are caning Sterling and won't stop soon.

The Yen situation is different; the BoJ is printing effectively endless money to deliberately devalue the Yen and kick start a stagflating economy. The markets aren't targeting the Yen and there are no technical drivers; its pure, deliberate fundamentals driving it down.
 

Grumblegrunt

LE
Book Reviewer
#15
the euro is yet to hit big time - another bad quarter and the krauts will get jittery, the french are losing tax revenue like a leaky tap and wont cut spending. meanwhile greece, portugal and spain are still there waiting to implode.

the more they kick it down the path the worse it gets.
 

DieHard

LE
Book Reviewer
#16
I am not clued up to much on the value of the sterling only the us exchange rate and the cost of import and exports.
If it is drasticly devalued how will it effect the average family.
Its a struggle as it is. The only thing i have ever applied is owning a house because it always eventualy goes up in price and seems a safer bet than putting cash into our dodgy banks.

Will imports be too expensive to buy?
Will British goods be too cheap to sell and make a profit?


Sent by Crapatalk. Sitting on my bog having a dump.
 
#17
In very simplistic terms, the cost of imports will go up and the cost of exports will go down, so we should import less and export more. But that ignores many of the other dynamics going on. For a start, Sterling is appreciating against some economies (eg Japanese Yen), so Japanese goods should get cheaper.

Also, there are many commodities that we have to import, such as oil and wheat. These are denominated in US$, against which they are appreciating. So there is a double whammy there; the U$ is buying less oil than it was last year and Sterling is buying less dollars. Eventually the price of higher commodity imports will filter through into higher manufacturing costs and higher export costs. Most commentators suggest that a fall below $1.4 will rapidly impact on export prices.

The only way out of this is to rebalance the economy and get enterprise and entrepreneurism working again. The underlying principle behind George Osbourne's economic strategy of protecting the AAA rating was, I think probably the right thing to do because it held our borrowing costs down. If we loose AAA, our borrowing costs go up leaving even less to spend.

Sadly, I don't think Britain has really seen austerity yet. Despite the cuts, there has been no cut in the borrowing requirement, let alone the debt. The really difficult decisions have eluded this government as they did the last and will the next. In truth, they elude most of the electorate. You cannot run a country in which more than half of the population consumes more in benefits and services than they will ever contribute and we have been doing that for years. The markets are and will punish us for years of profligacy.
 

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