Reply to: Wise to admit we don't know whether sterling's pounding will continue

[BlasterBates]

Interesting article

Basically the view is, this isn't a crisis but benign devaluation.

However if a crisis were to occur, it would happen unanounced....

a bit like Northern Rock and all the other disasters recently.

scary

[BrilloPad]

The article makes sense, but unfortunately, it's written by Roger Bootle

He called the top of the house market in 2004 : what else has he done to offend you?

[bobhope]

The article makes sense, but unfortunately, it's written by Roger Bootle

[SantaClaus]

The reluctance of Europe to cut interest rates is just more proof that we are better to be out of the Euro. The Eurozone will only stagnate with this policy, while the UK economy improves with our lower interest rates.

I agree with you that the Eurozone holding rates will be at the detriment to Europe. But due to the interest rate differentials and dire UK outlook, the euro will continue to appreciate against the pound.

Eventually, the high euro will hurt Europe and the £ will recover against the euro. But I dont see this happening for a very long time.

[Cyberman]

I think we could even see stress on the Euro itself. With the various countries in the Eurozone having different economic pain-points and degrees of pain (for example compare Ireland with Germany), the lack of flexibility on individual monetary and fiscal policies could prove very interesting. It wouldn't surprise me at all to see a couple of countries in the Eurozone throw their teddies out of the pram in the coming 12-18 months.

WHS !!!!

[AtW]

the UK economy improves with our lower interest rates.

UK Service Baloony "Economy" gets inflated

[Cyberman]

German import prices this morning were bad, -3.4% against the expected -2.6%. But there was no reaction on the euro! What does that tell you?

UK will be cutting interest rates as low as the US in the future. Trichet would never let this happen in Europe. Therefore I am bullish on EURGBP.

Just look at a chart this morning, the Euro is going in the opposite direction to the £.

The reluctance of Europe to cut interest rates is just more proof that we are better to be out of the Euro. The Eurozone will only stagnate with this policy, while the UK economy improves with our lower interest rates.

[BlasterBates]

..as if tempting fate the pound drops 2.2%

His view is the pound is as likely to go up as down is wishful thinking.

The pound is going down. If Britain is lucky it might stave off a full blown currency crisis.

[AtW]

the home of the EU Belgium does not have a Government

That's why it was good idea to base EU institutions there.

I think we may see pound actually dropping below euro in Q1-Q2 2009 - just wait for the budget day when Chancellor announces massive deficit and increase borrowing (and deferred taxes probably).

[BlasterBates]

I think the break-up of the Euro zone is more wishful thinking, than a real possibility.

Why no Euor-Zone country will leave

The main advantage touted is always that a country becomes more competitive, but this can easily be achieved by reducing wages, as the Germans have done. How? simply relax labour laws and protection sit back and watch.

[AlfredJPruffock]

WHS. Depending on the severity of the crisis, I don't see the Euro surviving in its present form. The countries in the Euro are too divergent e.g. Spain is essentially bankrupt and needs different policies to Germany

I tend to agree with that - perhaps Germany will be first out and revert back to the DMark - this would be terrible for the Euro but a life saver for Germany - and a vote winner as the Euro has never been popular with the Germans.

[BrilloPad]

What he's saying is parity won't happen....well lets see shall we.

Too busy posting DOOM threads to read this one?

Unless there is a fundamental mispricing, when it comes to currencies the wisest thing to do is to admit that we simply do not know.

[AlfredJPruffock]

Looking at this economic review - we are all screwed.


The situation is just as bad in Europe.

Euler expects the number of insolvencies in Western Europe to rise from 169,000 this year to 197,000 next year, an increase of 16.7 percent.

U.K. firms will account for a large portion of that bankruptcy surge, with the burst of the real estate bubble and worsening finance and banking crisis creating havoc for British companies. Spain is also expected to be particularly hard hit from the collapse of the construction and real estate market.

Euler believes that German companies will continue to suffer from bad debt risk, while The Netherlands, which underwent only a 10 percent increase in bankruptcies this year, will see its insolvency numbers jump nearly 40 percent in 2009.

In Eastern Europe, the Czech Republic and Hungary will see bankruptcies increase by 15 and 20 percent, respectively.

[sasguru]

I think we could even see stress on the Euro itself. With the various countries in the Eurozone having different economic pain-points and degrees of pain (for example compare Ireland with Germany), the lack of flexibility on individual monetary and fiscal policies could prove very interesting. It wouldn't surprise me at all to see a couple of countries in the Eurozone throw their teddies out of the pram in the coming 12-18 months.

WHS. Depending on the severity of the crisis, I don't see the Euro surviving in its present form. The countries in the Euro are too divergent e.g. Spain is essentially bankrupt and needs different policies to Germany

[SantaClaus]

What he's saying is parity won't happen....well lets see shall we.

Parity is like a huge magnet.
We will get there if only because traders will want to test that area.