Piiss Poor Sterling Exchange Rate - Why?

I noticed the pound bombing more than usual and wondered what had changed since the end of last week when all the talk of an election seemed to be improving the outlook, then wham, all week it's been getting panned.

Mervyn King of the BoE has spoken to the meeja and stated that he will be printing more money, like many other gash 3rd world countries are wont to do!
I dont think we will see the pound go up until we get rid of the madmen running the cuntry (sic)

Good Times piece:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article7038521.ece


Sterling sinks as King talks of releasing more money

Sterling fell sharply on foreign exchanges yesterday after Mervyn King, the Governor of the Bank of England, warned again that it may be necessary to extend the Bank’s asset purchase programme.

The pound lost more than a cent against the US dollar in only ten minutes after Mr King told the Treasury Select Committee that the Bank was “ready to do whatever seems appropriate”.

The Governor said that he was particularly concerned by developments in the world economy, especially in the eurozone, Britain’s biggest trading partner. Asked by MPs if this meant that an extension of the Bank’s asset purchase scheme — also referred to as quantitative easing — would be needed, the Governor replied: “It may be. We’ll have to see how things pan out. My particular concerns at present derive from the state of the world economy. Recovery in our largest export market — the euro area — appears to have stalled.”

Sterling fell sharply, from $1.5529 at 9.13am — just before he began speaking — to $1.5398 at 10.30am, when he finished giving evidence to MPs.

Jeremy Cook, chief economist at World First, the currency exchange broker, said: “Mervyn King’s constant assertion that we may see further quantitative easing later in the year is acting like a dead weight around sterling’s neck at the moment.

“This, alongside concerns over our fiscal deficit heading into the election and how we are best to deal with it, will leave the pound unloved in the short term.”

Against the euro, the pound fell from €1.1406 to €1.1317, meaning that €1 buys 88.23 pence — the single currency’s strongest level against sterling for almost two weeks.

In his last appearance before MPs before the general election, Mr King sidestepped questions over when action should be taken to reduce the UK’s public sector deficit, one of the big divisions between Labour and the Conservatives. He told MPs: “I honestly think that much of this debate is being overblown, because even if you announce a programme — to the extent that a significant part of the fiscal consolidation will come from measures or adjustments to public spending — it is very difficult to make those changes to take effect immediately.”

Mr King also played down similarities between Britain and Greece, a comparison drawn recently by David Cameron, the Tory leader, insisting that he would be “immensely surprised” if the UK were to lose its triple-A credit rating.

The Governor said that the ratings agencies were looking for a “detailed explanation” of how Britain intended to reduce its budget deficit, but he warned: “You certainly can’t eliminate the deficit in one year. There has to be a programme announced that will start and continue right through the lifetime of the next parliament.”

 

Well, clouds and silver linings and all that. I get paid in US dollars at the moment so every penny the pound goes down against the dollar helps me to pay off what remains of my mortgage in UK. Of course when The pound is up I lose out. But for the last year or so, the exchange rate has been very helpfull.

 

I thought I posted this in finance? Mods? Have you moved it?

 

Agreed. I'm not even paying off my student loan at the moment (not earning enough), but it's shrinking all the time with the exchange rate! 2 years ago my loan would have been CAN$19800, now it's CAN$14850.

 

B@stards.
I am an expat paid in £££££.

I was laughing when I went to the US in Sep 08.....$2 for a pound. We couldnt buy enough smarties!

 

“A weak currency arises from a weak economy which in turn is the result of a weak Government”

Guess who said that?

 

Yes NB , I moved it to populate the thread, before moving it back to finance.

Exchange rate fluctuation is not something people normally look at, until they're going on holiday or trying to buy something gucci from the States.

It's a good topic for wider discussion I feel.

 

It always amazes me that it all boils down to how people feel on the day
As a layman if the Euro collapses (which I think it will in the next 2 years)
what effect will this have on the pound, surely it would mean more industries wanting to set up in the UK?

 

Well, I'm a septic paid in $$ and I have been watching it for vacation planning purposes. Trying to decide whether to fly to UK and RoI or drive to Nova Scotia (very pretty place that).

Airfares are higher than last year and if rentals go higher the man at the Hertz rental desk will be wearing a mask and carrying a gun as that is uniform for robbers.

Lower GBP will mean more tourists, more people buying Jags and Land Rovers, tweed clothing etc from the UK. You may not want more fat noisy sunburned tourists (like me) there but selling goods does help the economy. It is why Obama wants a weak dollar vs yen so people buy US.

Buy the way, read car ads in the paper during a loooong wait at the dentis's office today. If I wanted a Toyota now would be a good time to buy.

Also, when rearended last October by a girl in a Prius who claimed her brakes failed I thought to myself "bullsh1t". Now realize the girl was probably telling the truth.

 

I don't claim to be an economist, however, I have long predicted that, as the better prepared parts of the world come out of recession ahead of us, the pound's exchange rate would get worse.

I am also predicting that commodity prices will pick up soon, even in dollar terms. Imagine what that combination will do to prices in the UK.

 

Nova Scotia is quite pretty. You have to drive through my adopted province to get there and it's a shame that we're so uncool whereas NS are very, very cool. You should drop by Fundy park in the summer though on your way through, pretty decent.

I was just looking at car rental prices for when my parents visit sometime soon and when I go back this summer for a couple of weeks. I can not believe how much car rental has gone up this year - last year I got a top of the range Insignia for £110 for 4 days - renting a focus for two weeks is looking like £500. When you add on the damage waiver that they fcuk you over if you don't have you're looking thick end of £600 before any bloody fuel is in the car. Same situation over here as well. I reckon it's currently twice as high as it should be - not sure what's going on.

 

I'm quite happy with it. Most of our kit is flogged to the US or Europe, so the low rates are helping make us more competitive. Component prices haven't been too badly affected yet.

 

Gorden Bennet! How many times do I have to tell you PTP, I AM NOT SELLING my body!!!!!!!

 

If the Euro tanks, it will make exports from Euro countries cheaper abroad - hence more industry setting up if it is likely to be weaker in the long run!

The weaker a currency is, Imports are more expensive and exports are cheaper.

Exactly the opposite for a strong currency.

 

Cheers