Revision: The Pound Falls to 5 Year Low against the Euro

Today’s revision note is on exchange rates and is designed for AS students - the pound has slipped to a five year low against the Euro. It is perhaps the result of the Euro’s strength against the US dollar rather than any fundamental collapse in market sentiment against sterling.

The currency markets are expecting the Bank of England to cut official policy interest rates further this summer (the Governor of the Bank of England hinted strongly that this will happen in evidence to the Treasury Select Committee yesterday and the Chief Economist at the BoE, Charles Bean, has said that he expects the pound to fall further!). So while £1 will still buy you more than $2 but it will get you only Euro 1.28.

The revision note is available for download as a pdf file below.

Here are two recent BBC news clips on the effects of exchange rate changes - both useful for macro revision purposes.

How currency changes hit firms

Strong euro hits UK importers

Revision note file

Revision_Focus_Exchange_Rates_AS.pdf

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Martin Wolf on Global Shocks [10 Feb 2012]
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Unit 4 Macro: France loses her AAA credit rating [15 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]
The Eurozone Crisis Explained (again!) [22 Dec 2011]
Unit 4 Macro: Celebrating (?) Ten Years of Euro Notes and Coins [2 Dec 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]
The Return of Protectionism? [12 Oct 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
AS and A2 Macro: Exchange Rates and “Safe Haven” Currencies [2 Oct 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]
Mixing with the Nobel Economists [4 Sep 2011]
Zondle Game: Currencies of the World [30 Aug 2011]
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AQA ECON4 Context [20 Jun 2011]
Macro Revision: Putting Things in Context [25 May 2011]
AQA Macro: Remember to revise inflation [25 May 2011]
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AS Macro Key Term: Recession [23 May 2011]
AQA A2 Economics - European Context [23 May 2011]
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EU Economics: Comparing the UK with Europe [14 May 2011]
Interest Rates Held at 0.5% once again [5 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]
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AS and A2 Macro Revision: The China Effect [26 Apr 2011]
Focus on Ireland’s Economy [12 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]
A2 Macro: Paul Mason’s blogs on the Euro Crisis [7 Apr 2011]
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A2 Micro: Updates on Competition Issues [2 Apr 2011]
AS Macro Key Term: Relative deflation [2 Apr 2011]
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OCR F585 June 2011: Data Charts (2) [30 Mar 2011]
OCR F585 June 2011: Data Charts [30 Mar 2011]
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Poor human capital in Portugal [25 Mar 2011]
Timetric: Currency movements against the Euro [16 Mar 2011]
Focus on Spain [16 Mar 2011]
Timetric: Comparative prices in the EU single market [15 Mar 2011]
EU Economics - Video Resources for Teaching [15 Mar 2011]
Timetric: Price convergence within the EU [13 Mar 2011]
Timetric: Unemployment Rates for Selected Countries [12 Mar 2011]
EU Economics: How far is the Eurozone away from being an OCA? [12 Mar 2011]
Ireland - Mass Unemployment and Shrinking GDP [10 Mar 2011]
EU Economics: Germany leads Euro Zone revival [25 Feb 2011]
AS Macro: What next for the pound? [14 Feb 2011]
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Reasons to fear a jobless recovery [11 Aug 2010]
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A selection of revision notes on monetary policy [4 Jun 2010]
A selection of revision notes on exchange rates [2 Jun 2010]
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Are we on the cusp of a second banking crisis? [1 Jun 2010]
AS Macro Revision: Cost Push Inflation [31 May 2010]
Euro Land and Optimal Currency Areas - A Valentine’s Day Massacre [29 May 2010]
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