Monday 19 November 2007

Brown's Pound


This chart shows Sterling against the conventional basket of other currencies (source: Bank of England). Interestingly, it has been riding high on a global basis for a full decade now, which kinda coincides with . . .

Does Sterling still really feel like it should be a strong currency, or does the right-hand end of the graph look more like the edge of a precipice ? The high plateau begins to look increasingly like it should be called the Blair Pound.

And how jolly unfair would that be ?

ND

10 comments:

CityUnslicker said...

Quite agree, the pound has peaked and the only way is down now as credit crunch, housing and government debt comes home to bite.

On the other hand, if it holds above $2 for another couple of months then it will be easier for the bank of england to lower interest rates.

Old BE said...

I think the pound will sink just as the BoE wants to start cutting rates, leaving us stuck in an awkward position.

James Higham said...

What caused the 03 dip?

Nick Drew said...

Good question. I recall 2003 was the year the € finally sloughed off its initial lengthy period of weakness. The $ had already begun its decline in 2002.

If there is indeed a correlation between the £ and the fortunes of NuLab, perhaps we should be recalling NuLab's 2003 problems. Invasion of Iraq was that year.

Mark Wadsworth said...

I bloody well hope so, having bought JPY a few years ago at 200 to the £, have been nursing embarrassing losses ever since.

Wolfie said...

I think the '97 rise has to be attributed to the Major tenure, notice it flattens off as soon as Blair has finished un-boxing his belongings into No. 10.

I wouldn't call the pound strong, I'd call it less weak than the others as the major manufacturing blocs have been keeping their currencies artificially low over this period in order to boost exports. The UK on the other hand exports Financial expertise (mostly) and so requires a strong-ish currency. So I'd call it about right up until now, however the future looks less certain.

Anonymous said...

The graph shows the relationship of supply and demand for the pound over the period. During 1996 the Ken Clarke economy was in excellent shape and the UK really was firing on all economic cylinders, hence no big surprise that the £ was rising high at that time. Everyone in the world wanted a slice of that UK action. By 2001 the bottom had dropped out of the economy because of the so-called "dot-com" crash. Europe went into a recession but the UK didn't - because the UK government ensured interest rates were slashed and reflated the economy. Naturally the corporations of the EU decided they wanted a place at the only game in town and bought into the UK big time. So demand for £ remained high. However, in the end we have got ourselves through the 2001 "recession" by whipping out the national credit card - sure, demand for £ from our European "partners" was high, but they just wanted to take advantage of our imprudence before the inevitable crash. Which will not be long coming.

Nick Drew said...

Anon - I have never mastered macroeconomics and am glad to have your summary

(but then I am left wondering about interest rates were slashed at the same time as the £ rdidng high ...)

Anonymous said...

"but then I am left wondering about interest rates were slashed at the same time as the £ rdidng high"

But still relatively high compared to other countries.

Nick Drew said...

ahah !

* * * *

but then ... hang on a minute, how come our competitiveness ...

see, I thought I had it there for a second