Why is the pound taking a beating from the euro all of a sudden?

[scooterscot]

My day rate just keeps climbing

[doodab]

I'm not sure. I assume the markets think the British economy is pretty stuffed.

The € was doing badly for a while because of the worries about eurozone banks holding dodgy government debts but those worries seem to have passed, even the recent downgrades to Ireland and Spain don't seem to have had much impact, so I suppose those earlier falls are reversing. It's still weaker against the pound than it was at the start of the year though, so we could have more to come.

Parity by Christmas anyone?

[scooterscot]

Last week we were seeing 1.22 € to the £ now it's 1.175 today.

Parity sounds great, in theory, when working in euroland but at the same time I've assets back home and if the £ keeps falling the pressure to increase interest rates grows.

[doodab]

But we had €1.09 to €1.10 a few months ago.

I think the MPC will be more concerned with runaway inflation. A weakening pound is going to help exports, although it might make it harder to fund the defecit they can always sell euro denominated bonds

[Doggy Styles]

Did you consider that you losing money earlier in the year when the euro hit the rocks?

It's all froth. It's been lower, and it's been higher.

[NoddY]

ECB: Euro exchange rates GBP

Click on "All" to see what Northern Rock and Lehmans caused.

[Mich the Tester]

The € was doing badly for a while because of the worries about eurozone banks holding dodgy government debts but those worries seem to have passed, even the recent downgrades to Ireland and Spain don't seem to have had much impact, so I suppose those earlier falls are reversing. It's still weaker against the pound than it was at the start of the year though, so we could have more to come.

The biggest economies in Euroland are nothing like as stuffed as Greece and Spain; even Italy isn't as buggered as some people think; as soon as sales of cars and white goods improve, the Italians start making money again. Greece is a tiny economy compared to the big economies like France, Germany and Italy, all of whom aren't doing as badly as was expected. Benelux is OK thanks to reasonably sensible fiscal policies. If you downgrade the euro because you think eurolands sovereign debt is a problem, you're automatically losing out on the chance of very long term very safe investment in German, Dutch, Belgian and Luxurybourg gilts; all those countries have very solid reputations and actually form a larger chunk of the euroland economy than all the olive oil countries together. Ireland seems to be getting it's act together on the fiscal side, and I've heard that the economy there is at least showing signs of not getting any worse.

[Sysman]

The biggest economies in Euroland are nothing like as stuffed as Greece and Spain; even Italy isn't as buggered as some people think; as soon as sales of cars and white goods improve, the Italians start making money again. Greece is a tiny economy compared to the big economies like France, Germany and Italy, all of whom aren't doing as badly as was expected.

Speaking of Greece, on the train home tonight I read a headline that Greek civil servants have until the middle of the week to describe what their jobs entail, and if they don't they lose their pay.

Sounds a good idea to me.

[centurian]

I think the MPC will be more concerned with runaway inflation.

As in "concerned" on how to sustain it - can't see any other way of getting rid of the debt, other than to inflate it away, so we only end up repaying a day's worth of GDP.

[milanbenes]

The biggest economies in Euroland are nothing like as stuffed as Greece and Spain; even Italy isn't as buggered as some people think; as soon as sales of cars and white goods improve, the Italians start making money again. Greece is a tiny economy compared to the big economies like France, Germany and Italy, all of whom aren't doing as badly as was expected. Benelux is OK thanks to reasonably sensible fiscal policies. If you downgrade the euro because you think eurolands sovereign debt is a problem, you're automatically losing out on the chance of very long term very safe investment in German, Dutch, Belgian and Luxurybourg gilts; all those countries have very solid reputations and actually form a larger chunk of the euroland economy than all the olive oil countries together. Ireland seems to be getting it's act together on the fiscal side, and I've heard that the economy there is at least showing signs of not getting any worse.

Mich,

very nicely put.

Reading the FT on the plane on the last few flights to work, sounds like Germany is turning the corner, manufacturing numbers are up up up, factories are taking people off short time working and even getting their temp numbers back up. Same goes for CZ infact the two from a manufacturing perspective are inextricably linked.

As we all know, manufacturing is the foundation stone of sensible economies, and once the manufacturing wheels start turning again, then slowly but surely the rest will pick up - so this is very good news.

Milan.