logo

Compared with last year your holiday is going to be a whole lot more expensive Sterling has fallen by about 10 per

Posted by admin   ·     ·   Jump to comments

Compared with last year, your holiday is going to be a whole lot more expensive Sterling has fallen by about 10 per cent against the euro. So, make sure you pour yourself a stiff drink when your post-holiday credit card bill drops on the mat. You could be in for a bit of a shock.From an economic point of view, movements in currencies produce both winners and losers. British manufacturers may be looking at latest developments with some degree of relish.

Having failed to deliver any decent productivity gains in recent years, they now stand to be bailed out by a good old-fashioned sterling decline. British workers looking forward to a nice rest after a stressful year in the office will find themselves having to pay top dollar – or should it be top euro? – for their sojourns in the sunny south of Europe.On the other hand, Europeans will find holidays in Britain relatively cheap. Just imagine the typical French conversation: "Ma cherie, we could have our usual holiday in Biarritz but I am a little bored with it Maybe this year we should try Margate for a change. I hear the British have a fashionable line in knotted headgear and apparently prices have come down a long way."Perhaps I'm letting my imagination run away with me Nevertheless, for policy makers, currency movements matter.

John Butler and David Bloom, my colleagues at HSBC, last week gave warning that sterling could fall a lot further over the next 18 months, driven down by a loss of UK growth momentum, a deteriorating fiscal outlook and, of course, wobbles in the housing market.Falling house prices provide a particularly strong case for a weaker currency: if growth is to be maintained but consumers are unwilling to spend in the light of falling house prices the most obvious way to keep things going is to switch the source of growth away from consumer spending towards exports. Of course, policy makers don't always voluntarily choose to go down this route but even when they don't, the market can force the decision upon them. Think back, for example, to sterling's departure from the Exchange Rate Mechanism (ERM) back in 1992.But this week I'm more interested in things from a continental European perspective. Two or three years ago, everyone knew why the euro was so weak It was a sign of economic failure within Europe.

readers comments

Comments are closed.

NBA

NBA

MLB

MLB

NFL

NFL

NHL

NHL

WWE

WWE

Your sideblock text goes here