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Unspeaked
Nov 12, 2008, 02:01 PM
LINK (http://biz.yahoo.com/ap/081110/eu_britain_pound.html?.v=2)

I meant to post this the other day, but on Monday, the British Pound fell to an all-time low vs. the Euro...

(By the way, it's actually higher now than what's quoted in the article - a euro is .83 pounds!)

Pound falls to all-time euro low
By Pan Pylas, AP Business Writer

Pound falls to all-time euro low on expectations of aggressive Bank of England rate cuts

LONDON (AP) -- The pound fell to an all-time low against the euro Monday after British producer price data raised expectations that the Bank of England has room to cut borrowing costs even further.

By mid-afternoon London time, the euro had risen to 0.8208 pounds, beating its previous high of 0.8195 pounds recorded in early September, before drifting back down to around 0.8180 pounds.

The latest bout of pound selling came after official figures showed British manufacturers' input prices fell 5.6 percent in October from the previous month, the biggest fall since records began in 1986. And output prices -- goods heading out the factory gate -- fell by a monthly 1.0 percent, again the biggest monthly decline since records began.

The pound has also taken a battering against the dollar in recent weeks, now trading around $1.57 and down from over $2 in July.

Analysts said the figures, which come ahead of Tuesday's consumer price inflation data, give the Bank of England's rate-setting Monetary Policy Committee the green light to continue cutting borrowing costs aggressively, following last week's startling 1.5 percentage points decrease in the base rate to 3.00 percent, its lowest level in over 50 years.

Lower rates can weigh on a country's currency by reducing yields on interest-bearing investments as investors take their money elsewhere.

"There's a dovish sense around the British economy and today's producer price numbers suggest there's room for maneuver on the inflation outlook and that has pushed the euro higher against the pound," said Daragh Maher, deputy head of global FX strategy at Calyon.

Though the European Central Bank is also expected to cut interest rates in the months ahead, the markets reckon that the Bank of England will be more aggressive in its monetary policy.

Last week's rate cut by the Bank of England took rate to their lowest since the 1950s, and lower than the European Central Bank benchmark rate, which was cut by only half a percentage point to 3.25 percent.

As a result, the benchmark rate in Britain is now lower than in the euro-zone for the first time since the euro was introduced in 1999, meaning investing in pounds will garner lower returns than investing in euros. That difference could swell over the coming months if the Bank of England cuts rates more savagely than the European Central Bank, as anticipated.

"The ECB seems more reluctant to go the more aggressive route than the BoE," said Calyon's Maher.

There's even speculation that the Bank of England will cut interest rates to below 2 percent for the first time since it was founded in 1694 in the reign of William and Mary. Its key rate fell to that record low several times in the 19th Century and in 1939-1951.

Schtumple
Nov 12, 2008, 05:24 PM
Wow, hard times are indeed ahead. I always admired how strong the pound was against other currency..

IJ Reilly
Nov 12, 2008, 06:16 PM
Wow, hard times are indeed ahead. I always admired how strong the pound was against other currency..

You mean, for about six months?

Schtumple
Nov 12, 2008, 06:17 PM
You mean, for about six months?

I meant against the dollar and euro.

IJ Reilly
Nov 12, 2008, 06:26 PM
I meant against the dollar and euro.

Right, for about six months. That's about the full extent of the time it was trading at much of a premium against the dollar and the euro. Maybe a year.

Schtumple
Nov 12, 2008, 07:28 PM
Right, for about six months. That's about the full extent of the time it was trading at much of a premium against the dollar and the euro. Maybe a year.

Ok, cba to argue.

Rodimus Prime
Nov 12, 2008, 09:12 PM
that is a really bad sign because the Euro is falling like a rock against the dollar right now as well.

IJ Reilly
Nov 12, 2008, 09:20 PM
that is a really bad sign because the Euro is falling like a rock against the dollar right now as well.

A bad sign for whom? I'd been contemplating a trip to the UK next year, but the value of the dollar was holding me back. Looks like we may be going after all.

Rodimus Prime
Nov 12, 2008, 10:18 PM
A bad sign for whom? I'd been contemplating a trip to the UK next year, but the value of the dollar was holding me back. Looks like we may be going after all.

true. Good sign for the US traveler bad sign for England.

I was reading really the huge boost in the dollar and the yen is because those 2 currency are consider the "safe" currency in economic hard times.

IJ Reilly
Nov 12, 2008, 11:12 PM
true. Good sign for the US traveler bad sign for England.

I was reading really the huge boost in the dollar and the yen is because those 2 currency are consider the "safe" currency in economic hard times.

I'd think the euro would also hold up pretty well in bad times.

And before some of our British friends mention it, the pound sterling is the currency of the entire UK, not just England. ;)

timmyb
Nov 13, 2008, 03:26 AM
I don't think it's that bad news for the UK given the current situation. A weaker means exports are more competitive so that gives UK exporters a boost. Import prices are up but inflationary pressures aren't exactly huge at the moment!

I've always thought the was undervalued in the past as it's a young currency so has had to build up a reputation. The was probably overvalued as well so although it was nice for Brits travelling abroad, it wasn't really a long term position.

Dagless
Nov 13, 2008, 06:16 AM
My gramps is off to Germany tomorrow, booked it last minute so the flight was quite expensive and the conversion rate leaves him with less holiday funds. Unlucky, I spose!

Rodimus Prime
Nov 13, 2008, 06:56 AM
I'd think the euro would also hold up pretty well in bad times.

And before some of our British friends mention it, the pound sterling is the currency of the entire UK, not just England. ;)

you should look at the Euro vs the Dollar. This summer the 1 Euro was worth over $1.60. Now today it the 1 Euro is worth $1.25 and falling.

And think this summer everyone was think the dollar was worthless and now it is flying up in strength compared to all other currency other than the yen.

Unspeaked
Nov 13, 2008, 09:31 AM
Right, for about six months. That's about the full extent of the time it was trading at much of a premium against the dollar and the euro. Maybe a year.

I don't know about that.

I consider anything over $1.70 - certainly over $1.75 - to be a pretty good premium (traditionally, the dollar was around the $1.50 level we're at today versus the pound) and if you look at this chart, you'll see it's been in "premium" territory since 2004:

http://ichart.finance.yahoo.com/5y?gbpusd=x


And here's the 5 year chart of the pound versus the euro, which looks even more extreme:

http://ichart.finance.yahoo.com/5y?gbpeur=x

And neither of these charts adequately represent the recent days falls to levels of $1.48 and $1.18 respectively...

IJ Reilly
Nov 13, 2008, 10:24 AM
you should look at the Euro vs the Dollar. This summer the 1 Euro was worth over $1.60. Now today it the 1 Euro is worth $1.25 and falling.

And think this summer everyone was think the dollar was worthless and now it is flying up in strength compared to all other currency other than the yen.

Not me. When I heard all the griping from folks abroad claiming that they were being "ripped off" by Apple's pricing entirely on the basis of their soaring currencies, I'd always suggest, wait a few months, this may well change (and it has). So taking a bit more of an historical perspective, it wasn't so long ago that the euro was worth less than one US dollar. For the time being, it's come down from historical highs against the dollar. That's about all we can say. Next week, who knows?

I don't know about that.

I consider anything over $1.70 - certainly over $1.75 - to be a pretty good premium (traditionally, the dollar was around the $1.50 level we're at today versus the pound) and if you look at this chart, you'll see it's been in "premium" territory since 2004:

I'm familiar with these charts. I don't know the average, but the pound has traded mainly in the $1.50-1.70 range for many years, with occasional ventures above and below. Certainly $1.70-1.80 isn't much out of that range, but when it traded above $1.90 for an extended period, that was a real premium by recent standards. Though the recent plummet is dramatic, it's too soon to say that some sort of fundamental currency revaluation is occurring. Probably not.

Unspeaked
Nov 13, 2008, 10:40 AM
I'm familiar with these charts. I don't know the average, but the pound has traded mainly in the $1.50-1.70 range for many years, with occasional ventures above and below. Certainly $1.70-1.80 isn't much out of that range, but when it traded above $1.90 for an extended period, that was a real premium by recent standards. Though the recent plummet is dramatic, it's too soon to say that some sort of fundamental currency revaluation is occurring. Probably not.

All I'm saying is that after a brief flirtation with the $2 level in the late 80s, the pound settled down in the early 90s and never even approached the $1.75 until 2004. Since the, it didn't fall below that level until just now.

Yes, we don't know where it will go from here, but it looks increasingly like we just experienced a 4 year spike.

Roba
Nov 13, 2008, 11:10 AM
I am less likely to buy anything right now from the US and before i did use to import stuff over. It is just not worth it anymore and other people are saying the same as well.
I would also consider putting of travelling there as well if i wanted to go on holiday somewhere. Less people are likely to travel to the US now from abroad.

timmyb
Nov 13, 2008, 11:38 AM
Less people are likely to travel to the US now from abroad.I think fewer people are likely to travel full stop over the coming months!

IJ Reilly
Nov 13, 2008, 11:55 AM
All I'm saying is that after a brief flirtation with the $2 level in the late 80s, the pound settled down in the early 90s and never even approached the $1.75 until 2004. Since the, it didn't fall below that level until just now.

Yes, we don't know where it will go from here, but it looks increasingly like we just experienced a 4 year spike.

Sure it did. When I was living over there for several months during the early '90s the exchange rate was in the $1.65-75 range the entire time. I can't find any charts going back that far, but it was so. In all the trips I've made to Britain over the years (since the early '70s), I can recall only one time when the exchange rate was more favorable than $1.50.

Unspeaked
Nov 13, 2008, 12:03 PM
Sure it did. When I was living over there for several months during the early '90s the exchange rate was in the $1.65-75 range the entire time. I can't find any charts going back that far, but it was so. In all the trips I've made to Britain over the years (since the early '70s), I can recall only one time when the exchange rate was more favorable than $1.50.

This (http://www.miketodd.net/encyc/dollhist-graph2.htm) page has a chart going pretty far back:


http://www.miketodd.net/encyc/dollar-recent.gif

I don't see how someone could look at that and not think there's a distinct spike starting in 2004 and ending the past month or so...

(Or, if nothing else, a 10-year lull between 1994 and 2004)

Diatribe
Nov 13, 2008, 12:12 PM
that is a really bad sign because the Euro is falling like a rock against the dollar right now as well.

It is actually pretty good because Europe's exports have been suffering a lot with the exchange rates this year. This is good for the European economy, not bad.

IJ Reilly
Nov 13, 2008, 12:19 PM
I don't see how someone could look at that and not think there's a distinct spike starting in 2004 and ending the past month or so...

(Or, if nothing else, a 10-year lull between 1994 and 2004)

Good chart, thanks for finding it. You can see the "spike" in 2004-07 repeating a similar pattern in 1990-93.

We're probably not going to settle this one way or another, but clearly this is a big and dramatic move down for the GBP, but also pretty clearly, as the chart shows, these things do pass. All this really means is that a nice window of opportunity has opened up for Americans visiting Britain, a window that wasn't open just a few months ago, and might not be open a few months from now.

Unspeaked
Nov 13, 2008, 12:32 PM
Good chart, thanks for finding it. You can see the "spike" in 2004-07 repeating a similar pattern in 1990-93.

We're probably not going to settle this one way or another, but clearly this is a big and dramatic move down for the GBP, but also pretty clearly, as the chart shows, these things do pass. All this really means is that a nice window of opportunity has opened up for Americans visiting Britain, a window that wasn't open just a few months ago, and might not be open a few months from now.

Yeah, like you mentioned yourself, I've been looking more into taking a trip over there, and I'd imagine many mainland Europeans are, too, with the euro's improved exchange rate, so it's got to be good for tourism.

I just wish the flights weren't so expensive!

Another interesting thing about that chart - look at 1985, the first and only time the dollar and pound approached parity (in fact, I remember reading once that the two currencies actually did reach parity in the middle of the day at one point in time during that period).

IJ Reilly
Nov 13, 2008, 12:44 PM
Yeah, like you mentioned yourself, I've been looking more into taking a trip over there, and I'd imagine many mainland Europeans are, too, with the euro's improved exchange rate, so it's got to be good for tourism.

I just wish the flights weren't so expensive!

Another interesting thing about that chart - look at 1985, the first and only time the dollar and pound approached parity (in fact, I remember reading once that the two currencies actually did reach parity in the middle of the day at one point in time during that period).

We made one trip over there when the GBP was around $1.30 or something like that during the mid-'80s. That was also the days when a respectable B&B could be had for 8 per person. I remember during that short period when the pound came close to $1.00, Americans on the East Coast were flying over to London for weekend shopping trips. Didn't last -- these things never do!

yorkshire
Nov 13, 2008, 01:24 PM
A bad sign for whom? I'd been contemplating a trip to the UK next year, but the value of the dollar was holding me back. Looks like we may be going after all.

Sorry if it's a bit irrelevent, but why do people actually want to come to England? I'm all for tourism to help the economy, but, as a Brit myself, I wouldn't know why people would want to come here on holiday! Unless your going to London or something to see the sites I suppose. One tip if you do come here though-watch a Premier League game, the Premier League is the best League in the world and the atmosphere is incredible. If you can try to see Liverpool, Chelsea, Arsenal or Man U. It will be money well spent!

Wow I do drift off topic don't I??!?:D

trule
Nov 13, 2008, 01:46 PM
Americans on the East Coast were flying over to London for weekend shopping trips. Didn't last -- these things never do!

I made 3 shopping trips to the US this year from Germany, and honestly even the the dollar recovery its still a good deal to fly over for a few days.

On the topic of the Pound, against the Euro its really looking a bit of a disaster these past few days...ever since the last rate cut....against the USD, don't think that comparison is relevant anymore, based on the increase in credit/debt with all the bailouts...basically the dollar is being devalued but don't expect an announcement on that one until AFTER it has happened.

The astute amongst you may well ask, devalued against what exactly?

Unspeaked
Nov 13, 2008, 02:13 PM
Sorry if it's a bit irrelevent, but why do people actually want to come to England?

I think most people never realize why any tourists would want to visit the place they live, but there's always great reasons.

Just think of what you yourself would miss if you ever left England and those are usually the types of things tourist who visit want to see and experience.

Personally, I like visiting for the shopping, pubs, museums and to see friends.

I'd love to check out a match some time but I've never been fortunate enough...

IJ Reilly
Nov 13, 2008, 02:17 PM
Sorry if it's a bit irrelevent, but why do people actually want to come to England? I'm all for tourism to help the economy, but, as a Brit myself, I wouldn't know why people would want to come here on holiday! Unless your going to London or something to see the sites I suppose. One tip if you do come here though-watch a Premier League game, the Premier League is the best League in the world and the atmosphere is incredible. If you can try to see Liverpool, Chelsea, Arsenal or Man U. It will be money well spent!

I don't come for the sport, I can tell you that.

Believe it or not, if we do make the trip next year the main reason will be for a convention, to be held in Birmingham. I've only ever passed through this part of the country on the way to somewhere else. We've been to nearly every other part of Britain including some rarely visited by tourists.

Seriously, do you not see the attraction of the Cotswolds? Cornwall? Devon? The Lake District? The beer?

The astute amongst you may well ask, devalued against what exactly?

In the present environment, that is the question indeed.

FrankieTDouglas
Nov 13, 2008, 02:44 PM
Well, certainly seems like the times are getting better to being an American visiting Europe. Last time I was in France, I was paying around $1.60 per Euro. The Pound was even moreso.

nick9191
Nov 13, 2008, 02:57 PM
Terrible news if your in the UK and you want to buy a Mac anytime soon.

IJ Reilly
Nov 13, 2008, 02:58 PM
Terrible news if your in the UK and you want to buy a Mac anytime soon.

Why, did Apple raise the prices?

aethelbert
Nov 13, 2008, 04:10 PM
Terrible news if your in the UK and you want to buy a Mac anytime soon.
The Euro/Pound exchange rate has absolutely nothing to do with Apple's prices. While this is coinciding with a drop in the pound vs US dollar, the euro really plays no role. Also, with this, your money is becoming less valuable than it was before. As long as the prices are the same, you're actually getting a better deal...

timmyb
Nov 13, 2008, 04:25 PM
Sorry if it's a bit irrelevent, but why do people actually want to come to England? I'm all for tourism to help the economy, but, as a Brit myself, I wouldn't know why people would want to come here on holiday! Unless your going to London or something to see the sites I suppose.I think you've answered your own question!

I'm living abroad at the moment and miss quite a few things, (including some that I didn't think of as particularly special when I was at home.) The English countryside is probably the thing I miss most of all.

OutThere
Nov 14, 2008, 08:00 AM
Sorry if it's a bit irrelevent, but why do people actually want to come to England? I'm all for tourism to help the economy, but, as a Brit myself, I wouldn't know why people would want to come here on holiday! Unless your going to London or something to see the sites I suppose. One tip if you do come here though-watch a Premier League game, the Premier League is the best League in the world and the atmosphere is incredible. If you can try to see Liverpool, Chelsea, Arsenal or Man U. It will be money well spent!

Wow I do drift off topic don't I??!?:D

I just visited Glasgow, Edinburgh, St. Andrews, a few spots in the scottish highlands, Manchester and Liverpool last week...totally worth it. We wanted to see a premier league game but it was too complicated with our scheduling.

As for the exchange rates...I'm loving the strength of the dollar against the Euro right now, as I'm living in France converting $$ to out of the ATM.