State of the GBP , characteristics of an emerging economy.
Discussion
Saw an article in Bloomberg about this and they were quoting Bank of America:
“Investors should hedge for an “existential” sterling crisis as the British currency faces struggles usually seen in emerging markets, according to Bank of America Corp. strategists.“
I really don’t know much about this sort of thing other than a low value will lead to higher import prices so I guess will feed inflation, and that the typical response is to raise interest rates here (I recall the fall from the ERM all those years ago).
So people with knowledge and understanding of financial markets, is the Bank of America likely to be right or it it just an exaggeration of just how badly the U.K. pound is doing at the moment?
Are we likely to see the price of imports (eg I need a new Apple Mac Studio!) go up in the short term? Or just posturing?
Apple News link here……..
https://apple.news/AG5BkLNoJQs6mVLMXUL48TA
“Investors should hedge for an “existential” sterling crisis as the British currency faces struggles usually seen in emerging markets, according to Bank of America Corp. strategists.“
I really don’t know much about this sort of thing other than a low value will lead to higher import prices so I guess will feed inflation, and that the typical response is to raise interest rates here (I recall the fall from the ERM all those years ago).
So people with knowledge and understanding of financial markets, is the Bank of America likely to be right or it it just an exaggeration of just how badly the U.K. pound is doing at the moment?
Are we likely to see the price of imports (eg I need a new Apple Mac Studio!) go up in the short term? Or just posturing?
Apple News link here……..
https://apple.news/AG5BkLNoJQs6mVLMXUL48TA
The GBP has certainly seen a slight downward trend against the USD and EUR over the past half a year and with everyone talking the UK in to another recession this again places a stress on the pound's value.
IMO the bank of england should be raising interest rates much more steeply than what it has done so far to curb inflation, as a result you'd expect the GBP to hold more value.
But as always as long as the UK has a diverse rich economy (with the ability to bounce back out of recessions) then the GBP is always going to be 'floating' with good relative value against other currencies/economies.
IMO the bank of england should be raising interest rates much more steeply than what it has done so far to curb inflation, as a result you'd expect the GBP to hold more value.
But as always as long as the UK has a diverse rich economy (with the ability to bounce back out of recessions) then the GBP is always going to be 'floating' with good relative value against other currencies/economies.
The American banks tend to be a little ott when it comes to GBP. June normal is a month the USD is weaker.
This website always has balanced articles from across the spectrum.
https://www.poundsterlinglive.com/
This website always has balanced articles from across the spectrum.
https://www.poundsterlinglive.com/
Nothing to panic about. BoE have just got a little behind some other Reserve Banks in raising rates. Chances are you'll just see a double hike from BoE or UK inflation go higher and then BoE will be forced to respond later. The net impact of being behind other central banks is that a country tends to import inflation while other countries export it but that process can happen in reverse as well of course.
Having wages fall in real (inflation-adjusted) terms is tough for consumers though, once shocked unfortunately it can take years for people to start spending again. That's why you're seeing the provision of fiscal measures to ease inflation.
The difficulty is knowing how to respond. There are still some economists talking about inflation being "transitory" (including BoE) but fewer all the time. The prevailing view seems to be that the low-inflation environment has permanently receded and rates just need to be set appropriately to deal with inflation.
Having wages fall in real (inflation-adjusted) terms is tough for consumers though, once shocked unfortunately it can take years for people to start spending again. That's why you're seeing the provision of fiscal measures to ease inflation.
The difficulty is knowing how to respond. There are still some economists talking about inflation being "transitory" (including BoE) but fewer all the time. The prevailing view seems to be that the low-inflation environment has permanently receded and rates just need to be set appropriately to deal with inflation.
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