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Friday, 14 October 2016

GBP/EUR sunk too low

At the end of 2015, GBP soared to €1.42, on the back of better economic performance than Europe. This was too high for Britain's terms of trade, and Bank of England welcomed the fall in value of Sterling as the date of the Brexit Referendum approached.
Of course, it was thought that Britain would vote to remain and that the pound would bounce back.
Now sterling has fallen so low that British trade is adversely affected. Certainly, its exports are competitive, but its costs are too high and consumers' spending power has been squeesed dry.
No changes have yet been made to the treaties. Politicians are behaving badly: saying bad things, threatening disaster. However, in the heel of the hunt, both Britain and Europe will want to optimise trade between the two zones, and he eventual paperwork will be benign. In the meantime, Bank of England will have to defend the pound, including increase sterling interest rates.

1 comment:

  1. NBCC has dipped 4% to Rs 241 on intra-day trade, extending its Thursday’s 1% fall on BSE, after the government stake sale in the construction company started yesterday.