tanyatriangles

iTrader: (2)

I'm going to post TWO questions, in separate threads, if that's OK mods, and would like them kept separate if possible? Thanks.

The first is this: The £ has plummetted against the € and against other currencies. One of the given reasons is our record low interest rates. But the Americans have even lower rates, so why isn't the $ plummeting too, and why is the £ faling against the $?

What is it that they have done RIGHT, or tyhat we haven't done at all, that has made US the apparent centre of difficulties, where over summer we were hearing American banking collapse, now nothing?

I know there are some clever folk on here, so let's hear your views, please?

john_s

iTrader: (1)

If you want to buy oil, you have almost no choice but to buy it with US dollars. That keeps the dollar in demand, which helps keep its value up.

tanyatriangles

iTrader: (2)

So why did it reach such a low against the £? It went as low as $2.06 to the £.

LG John

The dollars value dropped dramatically over the last few years which is why you could get $2 to £1. However, since August the pound has followed a similar trend and lost value as well, for reasons mentioned already. If the dollar was to gain strength again before the pound recovered then you'd get even less $ to your £1.

Does anyone know what the likely longer term forecast is? Will the dollar or pound or both make some recovery of weaken further, etc?

ALi-B

iTrader: (1)

This is the way I see it in a massively over-simplified view (laugh if you will ): that being the "real" market, and market "expectation".

The Dollar was already weak for quite some time as its expectations were always a bit iffy (thanks Bush, Iraq, Afgan, 911, Sadam, Bin Laden, etc.). If anything its realistic to its actual value. So when things went pear shaped it didn't drop that much because its value wasn't over-inflated in the first place.

In contrast, the Sterling has been over valued for far too long; it rose to a extremely high value against the Dollar and Euro, but the foundations of its strength were weak; it was all based on the expected market, not the actual market, fueled by giving the impression that there was plenty of wealth, when really there wasn't. The consequence of such, that in a market downturn it is soon realised that the expected values are nothing like its real value, hence there is little reasoning or basis to actually warrant that currency's value, hence it plummets at a far greater rate.

What happened to Sterling is I would call market actualisation. Where beforehand its high value wasn't realistic to its "real" value.

Bit like a house in a booming market; Its price inflates excessively and disproportionately because of excess demand, as soon that demand stops, values plummet sharply back to their true realistic value.

tanyatriangles

iTrader: (2)

Well, the above makes sense, except that I can't remember Sterling ever RISING against the €, it started at £1 = €1.62, and has fallen steadily, a few cents year on year, until it started to slide dramatically late last year.

Petem95

Sterling has collapsed because other countries can see how we are even more screwed than most countries at the moment because of sky high debt (both government and individual) and the fact that our economy was based on selling houses to each other for ever-increasing amounts of borrowed money. We dont really export much....

The dollar is worlds reserve currency, so will always have some extra strength due to this, however many economists predict it's value will collapse like Sterlings has, so we may well see the sterling/dollar ratio increase in 2009 as both countries sink deeper into recession/depression.

CharlesW

Sterling's weakness is due to the market's perception of the future prospects of UK plc. The market believes that the UK will come out of this recession relatively badly. Then Gordon's plan to further increase the National debt and try and spend his way out of the recession has really frightened the markets.

What's he going to spend it on. As a country we don't actually produce much these days. So we don't create much wealth. For a while everyone imagined that the financial service sector created wealth. But the credit crunch revealed that, that wealth was indeed imaginary.

I suspect that the Euro will lose some of its relative strength in the coming year. All is not rosey in Euroland. They too will go into recession. Germany already is. Spain has as bad a property crunch as we do, if not worse. Greece is coming apart at the seems and Italy is not much better. France has admitted they too are entering recession.

_Meridian_

iTrader: (1)

You forgot a classic rule of finance: when things get bad, buy dollars. That means that no matter how bad things get, it will always affect US dollars least. After that it's a matter of confidence, which is why the Euro is surviving better than the pound: investors/speculators think the Euro Zone can cope better than the UK.


M

paulr

Its all boll0cks this economics stuff. In the end we were spending like kings, but earning like princes. The $hit was bound to hit the fan.

EAndy

The Americans are continuing to print money to try and hide there issues which thankfully were not.

Think Germany in 1930's, America will end up with hyper inflation only good thing Gordon Brown has down is not what America is doing and printing money which is why the dollar is dropping + another million reasons

On another note I know for fact ration books and ID cards are being speed produced by the government because people don't realise how close the country is/was to the banks collapsing. No banks = no money hence ration books.

Luke

JUNE 2009
by then the truth will dawn on the public as to how bad
it is ...then the PANIC will begin.

EAndy

June 2009 you think, thats ok my Birthday is May 31st least I get that first. I think this year will be very interesting not 2009 yet and unemployment levels aren't short of reaching all time high.

China have already decided to stop lending us money now as well although continue to for America for now.

Russia are stepping up control of Georgia so soon we will be skint and held at ransom to having Gas supplied to our country.

We rely on importing so much and export pretty much next to nothing, we need to discover or create something that everyone in the world wants or needs now to get the economy going like it did for America late 80's with the Bill Gates era and Microsoft that made them have there 15 years of fame but I can't see that happening.

Can't wait for the Olympic games! and as he crosses the line through the gaffa tape. Or the 110m hurdles over a set of empty oil drums, high just is simply a set of 4ft, 5ft, 6ft, etc fences and the 4x100m rely is replaced with an egg and spoon race as they couldn't afford 8 batons

Petem95

I think we are, and will be more so soon. Labour have sneaked through the revoking of an old law which means that they nolonger have to declare increases in the amount of Sterling in circulation.

In other words they can just print money, but they don't have to declare it...

IMO things will get much worse in 2009 and 2010 than they are now, and it could even be 5-10years before we start to see any sort of slow recovery.

For things to improve there has to be some light at the end of the tunnel, and quite simply there isn't. In the first 6 months of next year I think another 10 or so high-street chains will have gone under. Nobody has any money to spend now the debt tap has been turned off. DSGI group either gone, or partly sold-off by the summer. Job losses will spiral as firms who have been retaining staff in the hope of a recovery will have to let people go. Jaguar/Land Rover will at best slash thousands of jobs, and at worst go under (who the hell is going to be buying Range Rovers and Jags?!)

I just hope things don't go as bad as some are predicting, to the point where we see widespread civil unrest and massive increases in crime and hyperinflation.

CharlesW

We will see a war before that happens or as a result of it happening.

Luke

Israel has just added fuel to the worlds problems (Not that i blame them)

I can see 100000 of people outside Buckingham Palace calling on the Queen to save this country from been forced back into the dark ages. the people need someone they can trust now. And there is not a single person in government i trust. its **** hitting the fan time in a whole new dimension

Leslie

The strength of a currency depends on the state of a country's economy and the faith that other countries have in it.

The reason for the devaluation of the Pound is the trouble that this country is in with relation to other countries and the way that our finances are being managed.

Les