Saturday, 27 February 2016

"Sterling falls on Brexit fears"

Said all the headlines last week. The BBC goes with Pound hits lowest level against dollar since 2009.

As per usual it is a load of flummery. I've done some charts showing each currency against a basket of other major currencies (the vertical scale is arbitrary, the long run average for each is about 1).

It is true that GBP has fallen again recently, but it's still well above its low point of 2011:

Here's the chart for EUR for the same period, in relative terms, EUR has fallen against GBP over the five years, from 90p at the peak, down to 70p and then a recent uptick to nearly 80p:

If anything, it is USD which recovered, from a low of 62p (which happens to be the average since 1990) up to 72p today:


DCBain said...

Based purely on holidays in France, I have long held that the pound is being deliberately undervalued against the euro. A few years ago we could happily consume as we did at home because, at(afair)1.4 euros to the pound, purchasing power was about equal. Since then we got to parity and even negative, I think, meaning we had to be more circumspect in our holiday eating habits!

Mark Wadsworth said...

DÇB, we live in London, where most things are ridiculously expensive, so when we go to Eurozone on holiday, it seems quite reasonable. Denmark is taking the piss though, £4 for a mediocre cup of coffee at the airport etc.

Lola said...

It's all nonsense anyway. All these currencies are crap.

mombers said...

@MW Denmark's VAT is 25% - remarkable that they survive under that punitive rate. They must be very honest.

Curtis said...

Yes, but it is the Brexit stuff that has caused the GBP to drop in the past few weeks.

If other factors had caused GBP to be valued at 2 USD in December, then it might have dropped to 1.8; if other factors had caused GBP to be valued at 1.2 USD in December, it might have dropped to 1.

I think Denmark is a bit self-selecting, people who live there tend to think they get some value from all the taxes they pay. If they don't then it is not too difficult to move to Sweden, Germany or the UK, or even the USA if you have the right sort of skills. And it works the other way, a lot of lefty Americans think Denmark and Sweden are some sort of utopia, though very few actually succeed in moving there. I don't know anything about their tax systems but I believe a lot of people live in Sweden but work in Denmark for tax reasons.