Pound/Euro rates have stabilised a little, after a dire start to October. At the time of writing GBP/EUR is just below €1.11. The Pound has been falling due to concerns about the UK giving up access to the single market, despite the fact the economic figures show that the UK economy remains resilient.
In the mainstream media, the falling Pound and a potential ‘Hard Brexit’ that would mean giving up free access to the single market have been dominating the headlines. But if you look past the negative reporting in the mainly left wing outlets such as the BBC, Guardian et al, maybe it won’t be the Armageddon that’s being predicted. The US, China Japan and Australia all have access to the single market without being in it. All they need to do is meet the EU’s regulatory standards. There is no reason the UK cannot do the same. Then, when you look at how much of our trade is within the EU, you start to realise there is a world outside of the EU’s borders.
For example, there were some interesting figures in an article I read this morning that show that 18 years ago, 61% of our trade was with the EU. Today, it’s 43% and falling. Non-EU trade is rising, is in surplus, and makes up the majority of our overseas trade. A point to remember is that EU trade is falling and in deficit. The single market perhaps then should not be the only focus of how the UK will trade globally in the future. One of the founding architects of the EU monetary union himself has also warned that the EU is a house of cards that is doomed to collapse. The EU has huge levels of unemployment, and seems to me to be an unsustainable ponzi scheme rife with protectionism that is doomed to fail sooner or later.
When you take a balanced look at the situation therefore, there is every reason to believe that in the long term the UK economy will prove resilient and remain one of the largest and strongest economies in the world. This should in time help the Pound recover. In the here and now though, the uncertainty that is currently dominating the currency markets is keeping downward pressure on the Pound, and I see no reason for that the change in the short to medium term. In time when it becomes clearer what our relationship with the EU and the rest of the world will look like, I think Sterling will bounce back to recover the losses we have seen over the last 6 months. So in summary, I think that yes the Pound will recover against the Euro, however this will take some time, and it’s likely to be well in to 2017 before any recovery starts to materialise. The doom mongering and negative reporting in the press isn’t helping either, and nor is the political bickering between Labour, The Conservatives and the SNP. Things could well get worse before they get better.
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