Re: Exchange rate
 

In normal circumstances the government gives the economic targets (which are economic stability and inflation within a narrow band); The BOE then sets inflation based on those. The problem comes when the government tries to sell too much debt and no-one wants to buy it - interest rates have to be raised to make the gilts attractive to investors (at least that's my understanding).

Re: Exchange rate
 

...BOE sets interest rates based on the governments inflation targets.

Re: Exchange rate
 

Yes - that's what I meant. A minor slip:p

Re: Exchange rate
 

The Bo of E is supposed to set interest rates solely to keep inflation at a target of 2% (with a margin of 1% either side) However in the US the Fed are targetted on growth and inflation. It could be argued that the Bank of England had had to deviate from their initial remit due to the Financial crisis

Re: Exchange rate
 

A few posters have joked in this thread about heading back to the UK if the exchange rate hits 1.50. I am curious if anyone would seriously consider this.

The current combination of buoyant Canadian house prices, price falls in the UK and the exchange rate is very favourable, especially if you came over with a lump sum pre 2007 when the exchange rate was 2.40+. Anyone tempted?

Re: Exchange rate
 

The bank of englands remit is monetary and financial stability. It's a common misconception that it's there to only target inflation - it's not.

Re: Exchange rate
 

Where in Canada is this? Also to answer your question, no we would not come back to England based on the exchange rate.

Re: Exchange rate
 

Certainly here in Ottawa and, if the news is to be believed, in Vancouver, Montreal, parts of the GTA and elsewhere.

Re: Exchange rate
 

not exactly what I would call buoyant! Improving maybe but even that depends which news source you listen to.

Re: Exchange rate
 

By buoyant I mean staying afloat which I think is an accurate description of the current market (with localised discrepancies of course), especially when compared to what has happened in the UK and US. Personally, I don't think it will last but while it does anyone thinking of returning to the UK is in a good position.

Re: Exchange rate
 

I exchange e-mails with Custom House this week to get their views on the exchange rate over the next 8-12 months. This was their reply:

"It seems likely that the GBP will get slightly worse against CAD before beginning to recover in the early part of next year. I think that the GBP is rapidly approaching undervalued levels, but it will take time to correct itself"

Re: Exchange rate
 

It's not undervalued while nulabia are 'in charge'!

Re: Exchange rate
 

They are just guessing - if they knew they wouldn't be brokers they'd be taking a position and making the cash themselves. My gut feeling is that where it is now is about right given the relative strength of the two economies. The fun will start if the US does too much competitive devaluation - I wouldn't like to guess what will happen in that case.

Re: Exchange rate
 

I appreciate it's crystal-ball gazing to some degree, but what's your gut feeling on where this could take things?

Re: Exchange rate
 

The link between USD and CAD will either break due to oil demand or it will drag CAD down with it or it will do something else - I honestly have no idea. If I was clever enough to know this I'd be rich.

I do think that the UK is certainly trying this approach right now - mervin is definitely talking the pound down on occasion (he knows everything he says will affect the market and so considers his words very carefully - or he's an idiot, but I actually don't think that's the case).