bigglesworth

I really cannot see it Jo, as the rest of Europe would never allow us in even at THIS exchange rate let alone at parity or better. Look at all the damage that Kohl inflicted on everyone by converting Ostmarks into marks at parity. Ever closer Union is one thing, but not when it gives Germany a competitive DIS-advantage.

Anyway, there is only a few months left of this bunch. Although Dave and Boy George do not impress, my dog could have done a better job than Gordon. The reason the markets are dumping sterling now is because they can. It may be more difficult next year with a Government that WILL raise interest rates, and reduce the deficit.
Just have to grin and bear it for a few months, whilst Gordon continues his scorched earth policy and set fire to the crops and kill all the livestock.

HBG

I wonder what would have happened if we had joined the Euro all those years ago? Maggie would never have entertained it, Blair left it all to Brown with his totally stupid five conditions and Cameron won't even discuss it.

We're the only country in the EU which hasn't joined the Euro. If the Euro fails, we'll be laughing, if it succeeds, we'll be an insignificant island on the fringe of Europe, with a currency no one wants.

Maybe we should join the Rupee, we've still got some connections in that part of the world, we used to own it. Whatever happens, I think the American Dollar is dead.

I'm praying that the Spanish will exit the Euro and go back to Pesetas and we'll all be rich again.

HBG

It used to sleep four people on a rainy Saturday night.

californiadreamin

I hadn`t been paying much interest in the exchange rates recently since moving back to live in Spain but was shocked to see the pound moving back down again. It`s at 1.10 today, I have a property for sale here in Spain and am seriously thinking that if I could sell it. I would like to buy something in the UK given the poor performance of the pound again. Problem is when I do manage to sell, the exchange rate may well have gone back up again.

How long do you think the pound will stay at this level of performance?

Fred James

If any of us on this forum really knew the answer to that we would not be spending time even reading your question - we would be making millions on the FX market!

Pick any figure from 1.20 to parity or below and you will be as well informed as the rest of us.

bigglesworth

This is rather closer to the truth f the situation in my opinion, than the partisan blether we have heard from Mr King lately.
The underlying point is, IMHO, that markets ALWAYS overshoot. So we cannot discount the markets ability to go lower than is justified - after all it went to 1.50, which was a ludicrous overvaluation for sterling. But it WILL revert to value.
So I still think 1.25 next year, and maybe 1.30.

http://www.telegraph.co.uk/finance/e...K-surplus.html

greghal

How can you say 1.50 is overvalued when we sat in a range of 1.43-1.52 for about 3 years! and from the conception of the Euro up into 18months back we had never been below 1.38!
The exchangerate is a reflection of so many elements it is so difficult to say what the 'true' value is.

cricketman

Very good point. Just looking at a graph and saying "ooh that looks high/low" isnt much of an analysis

One could say exactly the same thing about house prices

frigilianafreddy

It's always worth looking at the Economist magazine's "Big Mac" index (google it) to look at what big mac prices tell us.

In July the weighted average price of a big mac in euroland was €3.31 - at €1.10 to the pound that equates to £3. A big mac in britain costs £2.29. Answer: the euro is massively overvalued. Fair value is €1.45. So the big mac best guess is, say, a range of €1.30 to €1.60. Since the euro is becoming the second world currency and sterling never will be, i'd pick €1.30 as a likely target over the next year, with the brave hanging on for €1.45

Remember - you read it here first!

cricketman

Unfortunately that doesnt take into account that the prices are set at the exchange rate for the start of the year, so havent had time to be adjusted yet

Or that there are less McD's per capita in Spain than in UK so they dont benefit from so much economies of scale

Or the relative cost of employing someone in each country

Or that McDs competition in Spain is differnet to the UK

Or that a Big Mac in the US is probably cheaper than any other country... etc etc

jojojojojojojojojojojojo

All I know is that a trip to mcdonalds for my two kids in Spain is infinately more expensive than the same in the UK! In Spain its a treat, in the UK its a cheap option!

Jo xxx

agoreira

And the fact that wages are soo much higher in UK, it costs more to pay someone to flip hamburgers, makes Spain's prices an even bigger rip off. Glad I never eat them.

steviedeluxe

I'm glad that I'm not a eater of McDs!!! (not even tried Burger King for a long time). It all depends what you're comparing though. If you use public transport or want a glass of wine with a free tapa to nibble on then Spain is cheaper even at pound parity. However if you want to buy a book or take home a microwave meal special from a supermarket then the UK can be cheaper. I'm not sure that the Euro is over-valued even at £1 = 1 Euro. I know in the IT game you can get good developers or dbas in Spain or other European countries for Euro 30 k a year. In the UK you would have been looking at £35 or £40k. Now this is changing as salary levels are dropping fast in the UK. But I still think a web hosting company would find it cheaper to start in Madrid than in London.
Put it this way - why has the production of HP sauce been moved from the UK to the continent? I suspect it's because the manufacturing cost was judged to be cheaper. Now if the pound declines more this type of move may be reversed. In this sense a declining pound can help jobs in the UK. But it's bad news for people living in France or Spain who receive their earnings or pensions in pounds sterling.

bigglesworth

You simply cannot take such a sort period of time as three years as a valuation. Nor 7 or 8. Currencies swing in value a fair bit, but having been in the business of trading currency for over 30 years, I have a pretty fair idea of where I think the mid value is. It is muddied of course by the conversion from national currencies to a single currency but it is certainly not anything like 1.38.
The fact that so many people are saying that Spain is no longer cheaper than UK, (some things are cheaper some more expensive) should tell us all that here is not far below long term value.
I myself believe sterling will strengthen next year, as I keep saying (I did hope this year, and am not yet sure that it may not still) partly because the drop in value reduce trade imbalances, but mainly because I see no alternative to significantly higher interest rates in the UK than elsewhere in the developed world. But 1.50? We would need something special to see that again - the anticipated demise of the single currency or some such

Substitute pesetas and do a longer look.
The Euro has been strong on the back of two events- the ECBs wish for it to be an alternative to the dollar and the restructuring of German industry, at very substantial cost to Germany. But how long will German strength outweigh the structural weaknesses in Italy Greece Portugal Spain etc? And will Germany want to continue carrying the rest once the present crisis is over, if Italy etc continue to refuse to reform as Germany did after reunification? Far more difficult whilst in the single currency. It could just be Germany that withdraws. What price the Euro then? But that is another thread.
Longer term (i.e. over the next 20/30 years), all bets are off but I anticipate the continuing decline in importance of the EU will be matched by a similar decline in the value of the currency. So one way or another 1.50 may be attainable, but beware of what you wish for

cricketman

well said

There is a tendency for people to only look at examples where the reasoning will support what they HOPE will happen due to their personal circumstance

Its wishful thinking that the pound will only get stronger or the British economy will improve more quickly than others... which isnt to say it wont happen of course