Euro parity for the pound?
Recommend on Google+
I might be shot down in flames in predicting this but somehow I doubt that we will reach parity against the Euro.
It is the nature of currency markets to overshoot when the external value of a currency is making a long over-due correction. Notice how stable the sterling –euro rate was between the years from 2003 through to the summer of 2007. It was almost as if the UK economy had locked itself into a fixed exchange rate against the Euro!
Sterling’s weakness can be put down to several macroeconomic factors:
Steep cuts in official policy rates by the Bank of England
A dramatic weakening of the real economy with growth forecasts being slashed
A downgrading of expected real returns from overseas investment in the UK
Expectations that the UK economy will be badly affected by the extended fall-out from the credit crunch – given the huge indebtedness of the personal and government sector
But to move from where we are now to parity between sterling and the euro would represent an exchange rate movement well out of proportion to any economic fundamentals. Will the central banks permit it?
Remember that the European Central Bank is behind the curve when it comes to making interest rate reductions and the pressure will be on the ECB to move further in the early months of 2009 as inflationary pressures subside and the Euro Area moves deeper into recession.
The Guardian: Speculators push pound to record low against euro
blog comments powered by Disqus
Unit 2 Macro: China’s Trade Engine is Spluttering [10 Feb 2012]
Martin Wolf on Global Shocks [10 Feb 2012]
Trucks are the new way of measuring debt [1 Feb 2012]
Unit 4 Macro: Money, Debt and the New World Order [22 Jan 2012]
Unit 4 Macro: Russia Joins the WTO [22 Jan 2012]
Unit 4 Macro: France loses her AAA credit rating [15 Jan 2012]
Unit 4 Macro: Economics of Fiscal Deficit Reduction [12 Jan 2012]
Unit 4 Macro: UK Bond Yields Reach Record Lows [11 Jan 2012]
Unit 2 Macro: Factors Driving Business Investment [10 Jan 2012]
Hopes and Fears 2012 [10 Jan 2012]
Unit 1 Micro: Low Cost Airlines Beat the Recession [1 Jan 2012]
Unit 4 Macro: Exchange Rate Economics - Where next for the US Dollar? [31 Dec 2011]
European Economics: Resources on the CAP [28 Dec 2011]
2011 in Review - The US Economy [27 Dec 2011]
Unit 2 Macro: The UK Housing Market in 2011 [26 Dec 2011]
The Eurozone Crisis Explained (again!) [22 Dec 2011]
Unit 4 Macro: The Rise in Self Employment [17 Dec 2011]
Unit 4 Macro: Celebrating (?) Ten Years of Euro Notes and Coins [2 Dec 2011]
Unit 4 Macro: Does UK Manufacturing have a Future? [30 Nov 2011]
Where is the UK Economy? National Output [22 Nov 2011]
Beyond the Bike - The Value of Money [19 Nov 2011]
Unit 2 Macro: Should the EU introduce a Tobin Tax? [14 Nov 2011]
AS Macro: The State of British Business [13 Nov 2011]
Eurozone crisis - a selection of resources [12 Nov 2011]
Unit 2 Macro: Video Clips on Unemployment [6 Nov 2011]
Unit 3 Micro: Impulses to Change Management Models [5 Nov 2011]
Unit 2 Macro: Positive and Negative Multiplier Effects [14 Oct 2011]
UK Unemployment in October 2011 [12 Oct 2011]
Unit 4 Macro: Unit Labour Costs and Inflation [12 Oct 2011]
Unit 2 Macro: UK suffers a weak recovery [12 Oct 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
Unit 2 Macro: Homework Assignment on Consumer Spending [3 Oct 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Greek debt decision tree [25 Sep 2011]
Unit 4 Macro: Greek Economy at Default’s Door [25 Sep 2011]
Unit 2 Macro: Greece on the Brink of Default [25 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
Unit 2 Macro: Income and Wealth in the UK [12 Sep 2011]
UK Macro: Risks of a Double Dip Recession [12 Sep 2011]
Mixing with the Nobel Economists [4 Sep 2011]
John Kay on the future of Economics [26 Aug 2011]
Unit 4 Macro: GDP per person since the credit crunch [19 Aug 2011]
hiphopnomics [31 Jul 2011]
Monetary Policy Roundtable [25 Jul 2011]
What might happen on August 2nd? [12 Jul 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
Unit 2 Macro: Reducing Unemployment after a Recession [11 Jul 2011]
AQA ECON4 Context [20 Jun 2011]
A2 Macro: Consumer Spending [30 May 2011]
Macro Revision: Putting Things in Context [25 May 2011]
AQA Macro: Remember to revise inflation [25 May 2011]
AS Macro Key Term: Cost Push Inflation [24 May 2011]
PIIGS on the chopping block? [24 May 2011]
AS Macro Key Term: Trend Growth [23 May 2011]
AS Macro Key Term: Economic Recovery [23 May 2011]
AS Macro Key Term: Recession [23 May 2011]
AQA A2 Economics - European Context [23 May 2011]
AS Macro Key Term: The Output Gap [23 May 2011]
Revision notes on unemployment [22 May 2011]
A2 Micro: The Importance of Profit [19 May 2011]
A2 Micro: Innovation and Economic Policies [18 May 2011]
EU Economics: Comparing the UK with Europe [14 May 2011]
UK Economy Update: What Mervyn Said [11 May 2011]
Interest Rates Held at 0.5% once again [5 May 2011]
A2 Micro: Innovation in Markets [4 May 2011]
Macroeconomics revision - measuring Consumer Confidence [4 May 2011]
A2 Macro: Chinese investment in the EU [3 May 2011]
AS Micro: Rising Global Food Prices [2 May 2011]
Video Clips on the Chinese Economy [1 May 2011]
EU Enlargement - Evaluating the Impact [30 Apr 2011]
AS and A2 Macro Revision: Keynesian Economics [28 Apr 2011]
A2 Micro: EU Aviation - State Aid and State Ownership [28 Apr 2011]
AS and A2 Macro Revision: The China Effect [26 Apr 2011]
Focus on Ireland’s Economy [12 Apr 2011]
A2 Macro: Back to Roubini - a Year On! [11 Apr 2011]
AS Macro Key Term: Real Disposable Income [11 Apr 2011]
OCR F585 June 2011: Euro Area on the Rocks? [11 Apr 2011]
AS Macro Key Term: Monetary Policy Tightening [11 Apr 2011]
AS Micro: The volatile price of crude oil [9 Apr 2011]
AS Micro: Prices for New and Second Hand Cars [9 Apr 2011]
AS Macro Key Term: Double-Dip Recession [8 Apr 2011]
A2 Macro: Paul Mason’s blogs on the Euro Crisis [7 Apr 2011]
ECB breaks rank and raises interest rates [7 Apr 2011]
AS Macro Key Term: Under-employment [7 Apr 2011]
EU Economics - Portugal Reaches for Bail Out [6 Apr 2011]
AS Macro Key Term: Fiscal Austerity [6 Apr 2011]
Focus on Poland [5 Apr 2011]
Tracking the effects of the recession on GDP [5 Apr 2011]
Tutor2u Visits Madrid! [4 Apr 2011]
AS Macro Key Term: Expansionary Monetary Policy [4 Apr 2011]
A2 Micro: Updates on Competition Issues [2 Apr 2011]
AS Macro Key Term: Relative deflation [2 Apr 2011]
Timetric: Unemployment in the US Economy [1 Apr 2011]
The Scale of Remittances [1 Apr 2011]
OCR F585 June 2011: Competitiveness [31 Mar 2011]
OCR F585 June 2011: Data Charts (2) [30 Mar 2011]
OCR F585 June 2011: Data Charts [30 Mar 2011]
Pacific Peso Reaches 29 Year High! [30 Mar 2011]
Poor human capital in Portugal [25 Mar 2011]
The New North - Population Shift [23 Mar 2011]
ECONOMICS TEACHER RESOURCE NEWSLETTER
Join over 6,000 other Economics Teachers in the UK and around the world who receive the tutor2u regular Economics Resource Email Newsletter. Get special offers, first news of latest resources, teaching ideas, conferences and workshops + loads of great ideas for teaching economics from our blog authors.
