Pound lower than the euro

[EMM]

Spain has had its rateing downgraded today, interesting times ahead.
£ still in the doldrums.

[Bristle Si]

Spain has had its rateing downgraded today, interesting times ahead.
£ still in the doldrums.

Portugal is also deep in the mire.

As i forecast on here a couple of months ago, the £/euro rate will rise to 1.20 by mid-summer and maybe move as high as 1.25 by summer's end. UK interest rates will rise in the autumn.

Eurozone in chaos - no single fiscal policy, means euro doesn't work. If only Greece, Spain and Portugal had their own currencies back, they could devalue and stand a chance.

[EMM]

Why is the pound down then ?.

I would have thought we should be seeing E1.20 by now or is it all about the election uncertainty.

[cereza]

Why is the pound down then ?.

I would have thought we should be seeing E1.20 by now or is it all about the election uncertainty.

Sterling is also down because we also have a huge deficit and down the line we will take a hit unless the new government takes drastic action. So far none of the parties here has really come out and faced the problem because they fear it would lose votes - why do they treat us with such little respect? This lack of a plan will continue to knock Sterling. Anyway our debt is such that we may face a fall in our credit rating if we don't get our act together. Our big advantage over the PIGIS is that we can allow our currency to drop if need be and for that reason I beg to differ with Bristol C because I don't see our interest rates going up until 2011 at least. The sterling/Euro rate will move depending on the various news items as they come out. Certainly a Tory majority would help.

[EMM]

Cereza , although we are far away from each other in terms of our political loyalties I am in almost full agreement with you last posting.
The markets seem to see little diference between the plight of the Euro and the debt levels in the UK.
The US has just held its interest rates with and there is no pressure on the BOE to raise ours for some time yet.

A betting friend of mine was offered 14.1 on a labour victory and 13.8 on a tory victory and almost evens on a hung parliament.

[HampshireRich]

I agree with EMM and cezera with one important addition - if the debt chaos of Greece spreads to Portugal and Spain to the extent both those countries need help, then I feel the immediate future of the Euro will depend on the reaction of the German government. At the moment, there is no real movement on the Euro whilst Merkel treads a thin line between the desire to keep the eurozone together and the pressures now growing within Germany itself not to support the failing economies.

Bit of a nerve from them really, considering the help they got from the EU when unifying East and West Germany 20 years ago - perhaps not the financial amount we are now talking about, but certainly they received huge amounts for a while and the German contributions to the EU were reduced. Possibly why German politicians are still propping up the eurozone - if they start resisting, the Euro will fall - more against the dollar than sterling admittedly.

[cereza]

EMM if your friend can get 13.8 on a Tory overall majority then he should put his house on it and lay it off because its way out of line and he would be sitting on a no lose position that could win about 10 to 1 He didn't read it in the Mirror did he?
This morning Ladbrokes for overall majority have the Tories at 2-5 , Labour at 17-0 and Libs at 21-0.
Their favourite is a hung parliament at 1-6.If they are right and we get a hung parliament then expect initial sterling weakness followed by swings as the parties try to thrash out a policy

[cereza]

Agree with you Rich. The Germans did get help before but I don't think they will stomach bailing out the Greeks as long as the Greek system is so opposite to their own.
To inject massive funds into Greece would be political suicide for Merkel and the possibility of following that with more for Spain, Portugal et al is unthinkable.

The Greeks have always lived on debt and managed to continue by printing more and more money and devaluing.
Within the Euro zone they cannot print money or devalue so the only solutions are :-

1) drastic cutbacks in spending and tax increases which the public will fight tooth and nail causing governements to collapse
or
2) leave the Euro and revert to their old ways

Option 2 is the only realistic solution in my opinion.

[HampshireRich]

1) drastic cutbacks in spending and tax increases which the public will fight tooth and nail causing governements to collapse
or
2) leave the Euro and revert to their old ways

Option 2 is the only realistic solution in my opinion.

.... wouldn't any country leaving the eurozone spell the end of the euro if not the EU? - it would just prove it cannot work. I cannot see how Greece could possibly go back to the drachma (or anything else). The pure logisitcs of it all would send them spiralling into deeper debt. This is a real mess - for the hope of sanity within Europe they have to be forced to accept Option 1.

[cereza]

But who is going to force them Bruce? I don't know how true this is but I heard a guy saying that Greece has been living in debt for hundreds of years and evn defaulted in th 4th century BC !!!!!!!
Would Greece leaving the Euro be so difficult. They could tart it up and say it is a temporary deal while they get themselves sorted out. The UK among others exists within the EU without the Euro so why not Greece again?
The Greeks lied to get in the Euro so that gives a great excuse and would the Germans really try to dissuade them from leaving - I doubt it.
There is a rumour circulating that Greece already has a massive stock of Drachmas ready and waiting for release !!!
One thing to remember is that the current so called bail out being discussed is only a loan - it will only put off the problem to another day.
As you say it is a complete mess and only drastic action will resolve it.

[EMM]

£ is now under E1.15 where are all the so called experts who were forcasting E1.20 plus.

The markets are obviously concerned at the UK debt level information .that is emerging from our new government.

[HampshireRich]

£ is now under E1.15 where are all the so called experts who were forcasting E1.20 plus.

The markets are obviously concerned at the UK debt level information .that is emerging from our new government.

EMM - as in the other topic, both the euro and the pound are struggling as it appears speculators are jumping to the dollar at the moment. The pound was over €1.18 last week - dropped this week - will possibly climb back again next week. This seems to be the way it is at the moment.

[cereza]

£ is now under E1.15 where are all the so called experts who were forcasting E1.20 plus.

The markets are obviously concerned at the UK debt level information .that is emerging from our new government.

EMM you really have to look a bit longer term rather than the daily girations. The market short position on the euro was massive and so due for a correction just to flush out the shorts. With a weekend coming up a lot of people took profits today. Don't be surprised to see the euro under pressure again next week but if not then it will come in June

[EMM]

Its not the fortunes of the Euro that concern me but that the " markets " now seem to be linking Sterling and the Euro together.
Sterling is at a 12 month low against the dollar its fall is almost mirroring that of the Euro.
Talking to a business friend in Belgium yesterday he commented that the press there is now commenting on the UK debt levels and what a good thing it is that the UK is not part of the Euro.
Who is going to bail the UK out of trouble if sterling comes under real pressure.

[cereza]

Because the continental EU is our major trading partner our fortune will always be somewhat linked to the Eurozone.
Yes both the Euro and Sterling are near year lows versus the US$ but the Euro is near to year lows versus Sterling ie the Euro has depreciated more than Sterling. It wasn't that long ago we were discussing the pound/euro rate going to parity as opposed to touching 1-18 this week.
The Euro is sufffering from fears that it will break up or that one or more of the members will default on loans.
Sterling only has 1 country, The UK.
In the worst case scenario for the UK the IMF can rescue us as they did in the 70's when Labour last made a complete botch of our finances.
As long as a stable UK coalition government can put forward credible budgets to reduce the deficit then the markets wil lay off the UK. The deficit is huge but as long as it is correctly handled the markets will go along with sterling. The UK has never defaulted on a loan nor the USA whereas the weak memebers of the Euro cannot provide such a confidence boosting effect to the Euro.