Will the euro fall further against pound

Koptain Liverpool

I have recently moved to the UK.

I have some savings in my Irish bank account and am wondering if I should transfer it to my UK account asap in order to avoid further loss given the falling exchange rate.

I know its hard to predict but do you think the euro will continue to fall against the pound?

BoJack Horseman

I'm certainly no professional.

However with QE & Greece, it will be a tough year for the Euro.

Further falls wouldn't be surprising.

Koptain Liverpool

Yeah it looks like it should probably fall further in that regard alright. Although I´m wondering if the UK will do anything to reverse things as I guess they don´t want the pound to become too strong vs the euro

Godge

Koptain Liverpool wrote: »

Yeah it looks like it should probably fall further in that regard alright. Although I´m wondering if the UK will do anything to reverse things as I guess they don´t want the pound to become too strong vs the euro

That is a good point.

It can certainly be said that all other things being equal, the euro is likely to fall against the pound in the context of QE in Europe.

But other things may have an effect, political changes in the UK, QE in the UK, interest rates in the UK etc. that could accelerate or reverse the trend. QE in Europe doesn't happen in isolation from all other things.

NIMAN

Koptain Liverpool wrote: »

Yeah it looks like it should probably fall further in that regard alright. Although I´m wondering if the UK will do anything to reverse things as I guess they don´t want the pound to become too strong vs the euro

What else could the UK do, considering they have already done their own rounds of QE?

sarumite

QE and other monetary measures would be implemented by the central bank, which is independent of the government. while British inflation is low, it is probably not low enough for the central bank to start any anti-deflationary measure just yet. A stronger pound is not good for British exporters, although naturally a weaker pound makes imports more expensive. One issue the UK has been struggling with is stagnant wage growth, so weaker a pound could results in a lowering in the standards of living. Personally I think with this level of uncertainty, Carney will likely hold steady and wait before making any sudden changes to BOE policies.

Rightwing

I believe the EUR/USD is oversold, as is EUR/GBP.

Hope this helps.

Blue Magic

75p to the Euro today... Euro experiment hasn't worked

efb

That is stronger than when it was launched about 66p for a year

NIMAN

Seems to have been fairly steady now for the last week or so. Not much movement.

paul71

Blue Magic wrote: »

75p to the Euro today... Euro experiment hasn't worked

Working great for Irish companies selling to the UK.

NIMAN

£1 = €1.347 on CurrencyFair.

paul71

paul71 wrote: »

Working great for Irish companies selling to the UK.

This is such a parochial attitude. The man's comment pertained to the failure of the common currency on the whole, and not the currency's local triumphs in a peripheral shire of the Eurozone.

Ireland is the Kerry South of the Eurozone, and Michael Noonan is its Jackie Healy-Rae.

Of course, the "naked passion of the self-love of Nations" in the words of a Bengali bard, is not merely an Irish phenomenon, but an inbuilt, looming catastrophe on the European railroad.

As it happens, many of the benefits of a weaker Euro will exist only on paper, especially since Irish firms are so bad at reinvesting profits.

noodler

A Tyrant Named Miltiades! wrote: »

This is such a parochial attitude. The man's comment pertained to the failure of the common currency on the whole, and not the currency's local triumphs in a peripheral shire of the Eurozone.

Ireland is the Kerry South of the Eurozone, and Michael Noonan is its Jackie Healy-Rae.

Of course, the "naked passion of the self-love of Nations" in the words of a Bengali bard, is not merely an Irish phenomenon, but an inbuilt, looming catastrophe on the European railroad.

The "man's comment" summed the Euro up as a failure based on a temporary exchnage rate.

Jesus Christ - the Euro has its flaws but don't go imagining a couple of paragraphs of argument that the original poster didn't even make.

noodler

noodler wrote: »

The "man's comment" summed the Euro up as a failure based on a temporary exchnage rate.

Then shame on him for understating the case against it!

Eugene Norman

A Tyrant Named Miltiades! wrote: »

This is such a parochial attitude. The man's comment pertained to the failure of the common currency on the whole, and not the currency's local triumphs in a peripheral shire of the Eurozone.

Ireland is the Kerry South of the Eurozone, and Michael Noonan is its Jackie Healy-Rae.

Of course, the "naked passion of the self-love of Nations" in the words of a Bengali bard, is not merely an Irish phenomenon, but an inbuilt, looming catastrophe on the European railroad.

As it happens, many of the benefits of a weaker Euro will exist only on paper, especially since Irish firms are so bad at reinvesting profits.

Yawn. "Good for irish companies" is a legit response in a country which exports huge amounts to the U.S. and UK., in a forum called Irish Economy.

He's right.

Eugene Norman

Do people think a grexit is priced in? The euro sterling rate hasn't moved much for a few weeks.

Eugene Norman

Eugene Norman wrote: »

Yawn.

I'll type. You have a lie down.

Of course depreciation of the euro makes European exports more affordable. But depreciation onl really has positive medium/ long term effect if it meets a number of criteria: for example it must not diminish real incomes and it must lead to improved industrialisation and investment.

In reality, weak industrial investment in this country makes the benefits of depreciation all the more ambiguous. Certainly, Ireland shifts more 'stuff' on a volume basis, but on the other hand Ireland is a high importer of products with low price elasticity - i.e. we import a lot of stuff we can't produce, oil being a classic Irish example.

So the bottom line is that unless Ireland seriously invests in its industry, which it doesn't, the depreciation of the euro is likely to have very little effect on real GDP growth, and may even damage real GDP growth. It will almost certainly damage real growth in the Euro area.

Lets stop being so provincial. If we can focus on sustainable EU growth, we are fighting our own corner.

Eugene Norman

A Tyrant Named Miltiades! wrote: »

I'll type. You have a lie down.

Of course depreciation of the euro makes European exports more affordable. But depreciation onl really has positive medium/ long term effect if it meets a number of criteria: for example it must not diminish real incomes and it must lead to improved industrialisation and investment.

In reality, weak industrial investment in this country makes the benefits of depreciation all the more ambiguous. Certainly, Ireland shifts more 'stuff' on a volume basis, but on the other hand Ireland is a high importer of products with low price elasticity - i.e. we import a lot of stuff we can't produce, oil being a classic Irish example.

So the bottom line is that unless Ireland seriously invests in its industry, which it doesn't, the depreciation of the euro is likely to have very little effect on real GDP growth, and may even damage real GDP growth. It will almost certainly damage real growth in the Euro area.

Lets stop being so provincial. If we can focus on sustainable EU growth, we are fighting our own corner.

I'll give you one thing. You're an articulate economic illiterate.

We may have "weak industrial investment" ( probably you mean indigenous) but it's not 1950 and we can export services, food and we have quite a few multinationals. Ireland has an export surplus. Since that surplus is mostly with non eurozone countries it will make a difference if the cost of our exports in their currencies fall. Selling more by volume means we make more money in euro.

Oil has fallen faster then the dollar is appreciating relative to euro so the euro price of oil has also fallen. So that point is moot. Commodities are also down. Everything else can be sourced within the Eurozone.

And your main point about being parochial in supporting a euro devaluation is also incorrect. In a deflationary Europe it's not bad for the Eurozone to garner inflation by reducing the price of the euro. That's one of the points of QE. It's just not true that a euro decline will hamper GDP growth. The opposite is true.

paul71

Eugene Norman wrote: »

I'll give you one thing. You're an articulate economic illiterate.

We may have "weak industrial investment" ( probably you mean indigenous) but it's not 1950 and we can export services, food and we have quite a few multinationals. Ireland has an export surplus. Since that surplus is mostly with non eurozone countries it will make a difference if the cost of our exports in their currencies fall. Selling more by volume means we make more money in euro.

Oil has fallen faster then the dollar is appreciating relative to euro so the euro price of oil has also fallen. So that point is moot. Commodities are also down. Everything else can be sourced within the Eurozone.

And your main point about being parochial in supporting a euro devaluation is also incorrect. In a deflationary Europe it's not bad for the Eurozone to garner inflation by reducing the price of the euro. That's one of the points of QE. It's just not true that a euro decline will hamper GDP growth. The opposite is true.

Also makes direct inward investment cheaper, time for IDA to go shopping and add to our "weak industrial investment" in Intel, HP, phiszer, google, glendimplex, realtek, aircraft leasing, kerrygroup.

Or maybe I am just being parochial, and we dont export anything and we really are a nation of Devs comely maidens.

andrew

paul71 wrote: »

Also makes direct inward investment cheaper, time for IDA to go shopping and add to our "weak industrial investment" in Intel, HP, phiszer, google, glendimplex, realtek, aircraft leasing, kerrygroup.

Or maybe I am just being parochial, and we dont export anything and we really are a nation of Devs comely maidens.

Sure unless it's heavy manufacturing it's not a 'real' export dontcha know :rolleyes:

Eugene Norman

Eugene Norman wrote: »

We may have "weak industrial investment" ( probably you mean indigenous) but it's not 1950 and we can export services, food and we have quite a few multinationals.

Lets start with an English lesson for economics, and then move onto currency issues.

Industry refers to the range of business activity falling within the scope of NACE or the SIC, of which manufacturing, financial services, construction, etc, are component sections. Industry does not refer solely to the production of tangible goods, and it isn't at all clear why you have incorrectly interpreted my reference to industry.

Ireland has an export surplus. Since that surplus is mostly with non eurozone countries it will make a difference if the cost of our exports in their currencies fall.

I love how bland this is. It will "make a difference"?

Of course it will "make a difference". The question is whether an inevitable increase in the volume of exports would outweigh the negative impacts for real GDP by an increase in the price of imports with low price-elasticity of demand.

There would need to be undertaken an econometric analysis taking into account the real trade-weighted exchange rate of the Eurozone, and domestic demand and the trade elasticities that are relevant to Ireland. Ireland exhibits much lower elasticity of external demand than other members of the EA, whereas as a small remote island, its imports are very difficult to substitute.

On the issue of the trade surplus you mention, Ireland's current account surplus is at least partially explained by weak domestic demand. Depreciation risks exacerbating that.

On the issue of oil and commodities of course, at this moment in time, low oil prices complement depreciation. But what happens when the oil price increases and the euro is still falling?

I am simply warning people against falling for the foolish and hasty narrative that depreciation is in our best interests. I'd like to see the maths for that, because I'm skeptical.

andrew wrote: »

Sure unless it's heavy manufacturing it's not a 'real' export dontcha know :rolleyes:

I usually find your comments quite worth reading but as a former mod of economics myself I am perplexed by this statement. It has nothing to do with what I said.

realitykeeper

Koptain Liverpool wrote: »

I have recently moved to the UK.

I have some savings in my Irish bank account and am wondering if I should transfer it to my UK account asap in order to avoid further loss given the falling exchange rate.

I know its hard to predict but do you think the euro will continue to fall against the pound?

Long term, the euro has a slight advantage over sterling and other FIAT currencies. Here is the reason: the QE which has now started in the Eurozone is being done in such a way as to place 80% of the risk on the individual countries where the bonds are being bought. In other words, the PIG countries which want QE the most, get most of the QE but crucially they get it at their own risk.

This is to protect Germany from having to bail out other countries when the currency, equity and bond markets all collapse together. When that happens, Ireland will get to know real austerity. Up until now, the Euro would have lost a lot of its value if the pigs left the Eurozone. In future, the more the pigs leave, the more the Euro will hold its value. Also in the future, if the pigs stay, austerity in those countries will be all the more severe.

realitykeeper

realitykeeper wrote: »

the PIG countries which want QE the most, get most of the QE but crucially they get it at their own risk.

With the exception of Italy, the troubled peripheral economies are not the major beneficiaries of QE. Spain and Portugal are unlikely to see a major benefit (a bit like Germany), and Greece would be better off (in spades) with a strong euro.

On the other hand, the most conservative members of the euro have most to gain from QE: Austria, Finland, Holland... the countries that export lots and don't tend to import from outside the eurozone.

Quantitative easing could actually undermine some of the progress made by Greece, and its NCB is likely to be very wary of it, as will the NCBs of Spain and Portugal. Italy is the only troubled country that I think will be cracking open the prosecco.

Eugene Norman

A Tyrant Named Miltiades! wrote: »

Lets start with an English lesson for economics, and then move onto currency issues.

Industry refers to the range of business activity falling within the scope of NACE or the SIC, of which manufacturing, financial services, construction, etc, are component sections. Industry does not refer solely to the production of tangible goods, and it isn't at all clear why you have incorrectly interpreted my reference to industry.

I love how bland this is. It will "make a difference"?

Of course it will "make a difference". The question is whether an inevitable increase in the volume of exports would outweigh the negative impacts for real GDP by an increase in the price of imports with low price-elasticity of demand.

There would need to be undertaken an econometric analysis taking into account the real trade-weighted exchange rate of the Eurozone, and domestic demand and the trade elasticities that are relevant to Ireland. Ireland exhibits much lower elasticity of external demand than other members of the EA, whereas as a small remote island, its imports are very difficult to substitute.

On the issue of the trade surplus you mention, Ireland's current account surplus is at least partially explained by weak domestic demand. Depreciation risks exacerbating that.

On the issue of oil and commodities of course, at this moment in time, low oil prices complement depreciation. But what happens when the oil price increases and the euro is still falling?

I am simply warning people against falling for the foolish and hasty narrative that depreciation is in our best interests. I'd like to see the maths for that, because I'm skeptical.


I usually find your comments quite worth reading but as a former mod of economics myself I am perplexed by this statement. It has nothing to do with what I said.

Economists always amuse me. An uppity social science.

You are right -- to a limited extent -- about depreciation in some cases. If the punt depreciated it would have introduced inflation as external commodities would have been priced higher, and local industry would have had a hard time of import substitution.

In this case

1) the Eurozone is in a deflation trap.
2) the eurozone is much larger than the irish " punt zone" so import substitution is easy.
3) global commodities are falling.

What that tells you is that depreciation caused by QE can't be that bad. They want to introduce inflation.

so exports outside the EZ grow. Imports can be substituted or where, in the case of commodities, they can't are in generally falling anyway. The real problem is this may not work to increase inflation despite the falls in the currency.

realitykeeper

A Tyrant Named Miltiades! wrote: »

With the exception of Italy, the troubled peripheral economies are not the major beneficiaries of QE. Spain and Portugal are unlikely to see a major benefit (a bit like Germany), and Greece would be better off (in spades) with a strong euro.

On the other hand, the most conservative members of the euro have most to gain from QE: Austria, Finland, Holland... the countries that export lots and don't tend to import from outside the eurozone.

Quantitative easing could actually undermine some of the progress made by Greece, and its NCB is likely to be very wary of it, as will the NCBs of Spain and Portugal. Italy is the only troubled country that I think will be cracking open the prosecco.

In a short-sighted socialist sense you are right because a strong euro would buy more stuff from abroad and in the short term that would be good for Greek people. However the benefit would be more than offset because Greek exports would be more expensive to foreign buyers so Greek businesses would suffer. Such an outcome would be catastrophic in a country like Greece that needs to grow its exporting sector.

That said, I am not an advocate of QE. The PIGs should simply slash spending on services to the point where they are paying the interest on their debt, the principle on their debt and where they have a surplus for infrastructure investment. Governments that print money are usually no different to criminals that print counterfeit notes. It is theft.

Impetus

The EUR is over-sold at present. While it may fall a little more in the short term, you have a British election in May 2015. The outcome is scary - in terms of a coalition of extremists and more moderate parties. The uncertainty will cause the GBP to fall in my view. But you also have the money printing from Brussels starting in the next month or so, which will cause some measure of dilution of value.

In terms of USD -v- EUR - total US debt is 145* trillion against a GDP of 17 trillion. Of which federal, state and local public debt is 21 trillion. Which mkes the Greeks look pathetic in comparison when it comes to borrowing....


*http://en.wikipedia.org/wiki/Financial_position_of_the_United_States

Eugene Norman

Eugene Norman wrote: »

I'll give you one thing. You're an articulate economic illiterate

Eugene Norman wrote: »

Economists always amuse me. An uppity social science.

Oh Eugene you whimsical brute! You can't seem to decide whether I'm economically illiterate, or whether you reject the 'uppity' laws of economics. I never know where we stand with one another. Why do you send me mixed messages?????

I am not saying you're right or wrong. I am saying this question is ultimately one to be answered mathematically by some sexually-undernourished research assistant in a central Bank bunker. We're both far too young & beautiful to be driven into a crosseyed econometric stupor.

If Eugene Norman & Sons go into business selling Aran Sweaters to gullibile Americans at $50-a-pop during a time when the €1 is quoted at $1.13, you might assume that when the value of the €1 subsequently depreciates to parity, your firm will shift more sweaters and turn a profit.

The foreign exchange market does not work to simplistic canons. Firstly, Aran sweaters are probably highly price-inelastic. Purchasers of Aran Sweaters are nonchalant and a bit bourgeois (just like you, perhaps) and nobody cares whether they cost $50 or $45. Not only do the Americans not care, but you might get quite a fright when you see how greatly the cost of your indispensable costs (transport, energy and the cost of importing Merino wool) have shot up.

You are far too optimistic in responding that (i) oil prices are low at present and (ii) you can substitute non-EA imports with EA imports.

(i) Oil prices are far too volatile to make any sort of long-term arrangements on the basis of their currently being low. What happens when they increase?
(ii) Ireland cannot substitute indispensable improts with EA imports, because the Euroland itself is extremely reliant on the 'outside world' for commidities and energy. European price elasticity of imports is around 0.2. This is highly inelastic. Europeans must import!

If you want to see a country where depreciation has had the kind of dreadful impact I am warning of (not quite predicting, necessarily), just look at Japan.

andrew

A Tyrant Named Miltiades! wrote: »

I usually find your comments quite worth reading but as a former mod of economics myself I am perplexed by this statement. It has nothing to do with what I said.

I didn't mean to imply that that was a response to your post, tis just a flippant comment on the general attitude people (not you) have towards exports/industry.

NIMAN

Today on CurrencyFair:

£1 = €1.358

freelancerTax

up to 1.37 now......