The pound and the letter

Some said the pound would tumble more when we sent the letter.

Instead this week in the run up to its delivery the pound has remained fairly steady at around $1.24 and Euro 1.15, above the lows of October last year when the pound reached $1.20 and 1.10 Euros. The cut in UK interest rates last summer and the rises in US interest rates have of course led   to a stronger dollar. The world’s leading currency has also risen strongly against the yen and the Euro.

The pound hit an all time low against the Euro of 1.04 in December 2008 when we were firmly in the EU  and is now 10% above that.  It is also well above its all time low against the dollar.


  1. formula57
    March 29, 2017

    Perhaps Remoaners meant that the collapse of the £ will occur only when the letter is received, or filed, or archived or sent for shredding in 50 years time?

    1. zorro
      March 29, 2017

      I am sure that Newmania will be on later today explaining that it will all get worse sometime in the future….. It will be a wonderful thing when Newmania realises that there is no cliff edge.


  2. John Probert
    March 29, 2017

    The Bank of England have continually misjudged the economy and its time
    that interest rates took a small rise
    The current policy is fuelling private debt and house prices

    1. Lifelogic
      March 29, 2017

      Indeed but as they rise they also they need to look at bank margins which can currently be absurdly high. 0.2% if you lend to them. 5%-50%+ if you borrow.

      Clearly no real competition in the market they are getting away with murder.

    2. Bob
      March 29, 2017

      The govt are trying to inflate their way out of debt.
      By the time they come to repay the several trillion they owe, it will be barely enough to by a skinny latte, our savings & pensions will be worth diddly squat.

    3. zorro
      March 29, 2017

      Indeed it is only the poor judgement of the BoE in lowering interest rates which helped drive down the pound in relative terms – quite unnecessarily of course – but to suit a certain remainian agenda, and support ludicrous HMT forecasts…..


      1. Lifelogic
        March 30, 2017

        Indeed and the socialist, interventionist, big government, expensive energy, high tax borrow and piss down the drain agenda of May and Hammond hardly helps the value of sterling much.

    4. John Archer
      March 29, 2017

      It’s also robbing the little savers blind. Peacefully mugging little old widows.

      Compassion and concern? Nice if one can afford them. But they’re currently too expensive, apparently.

      Ho hum.

  3. Antisthenes
    March 29, 2017

    The pound weakening brought out the likes of the BBC to highlight their perceived understanding of the damage of that and based it’s fall on just one factor. Brexit. One of their own choosing the one which they wished to bolster their case for remaining in the EU. Not once did they point out the advantages of a weaker pound or the myriad of other factors at work that will have had some bearing on the process. What service do they give the people of this country if they suppress some of the facts to further their own cause. Does it not also point out that the cause they espouse must be very weak if they have to employ such tactics.

  4. Lifelogic
    March 29, 2017

    The pound is OK ish even with the socialist, tax borrow and waste, expensive energy, ever more intervention, dithering and red tape agenda of May and Hammond. It could be far far better with some Conservatives in charge.

  5. Richard Butler
    March 29, 2017

    Many Remainers across the airwaves and media (comments sections) assured that although their previous 4 predictions of a Brexit recession were wrong, that this long awaited recession will tumble down on us from the moment A50 is triggered.

    I wonder what their next excuse will be when the recession fails to appear?

  6. Mark
    March 29, 2017

    There is no good reason to expect the pound to fall. It is already discounting the idea of an acrimonious “hard Brexit”, which has dominated the news assumptions of all the important news sources, including those relied on by forex traders, such as the FT, Reuters and Bloomberg, let alone the BBC. The usual leitmotif in these markets is “Sell the rumour, buy the fact”.

    What might be good cause for a fall in the pound would be any backsliding on negotiations, as that would imply a failure to exit properly and ongoing costly impositions from the EU.

  7. Jack
    March 29, 2017

    Low interest rates fundamentally work to strengthen, not weaken, the currency, by reducing inflation. Hence it is likely that the $USD will weaken against £GBP in future. The Euro, on the other hand, is likely to strengthen a lot due to the massive and growing trade surpluses of the Eurozone.

    This is all taken with a grain of salt though, it’s very hard to predict currency movements when 99% of the economic institutions and investors etc don’t understand the monetary system. All I can say is what is fundamentally pulling currencies up or down. The power of clueless large crowds and huge central banks should not be underestimated…

    1. Jack
      March 31, 2017

      If the government is concerned about the economic impact of Brexit, why don’t they just do what the Chinese did to avoid their economy being hit by the GFC of 2008/09 and keep growing GDP at 10% to 15% per annum: directly force banks to lend more (or enact massive tax cuts and government spending, which is an even better method of boosting demand)?


  8. Richard Butler
    March 29, 2017

    John is case you missed it Radio 4s Today on Tuesday interviewed various Port / Freight industry people that explained there is no friction with regards to 97% of the WTO goods arriving in Britain.

    The programme was broadcast 28/03/2017
    •1.34.30 minutes in
    •Zoe Conway reporting

    To the left a cargo ship from China – Taurus
    To the right a ship from Netherlands

    Paul Davey – head of Corporate Affairs Felixtowe – commenting on the WTO goods coming off Taurus – ‘97% of goods are pre-cleared, no delays – unloaded and sent on immediately’.

    Commenting on the implications of a future WTO regime with the EU;

    ‘We don’t see a reason why there should not be frictionless trade’.

    1. Mark
      March 30, 2017

      You can be sure that the French would like to insist on clearance via a small customs office in Poitiers (as they did for non French made video recorders). We will at least be able to offer more business to the Netherlands instead.

  9. Jerry
    March 29, 2017

    Funny how our host obviously posted this before A50 was started, thus before what ever the reaction the FX markets might have this afternoon and in the days and weeks to come. Mr Redwood, will you leave your words up for posterity if you are proved wrong in the hours, days and perhaps weeks to come or will they vanish into the ether?

    The basis of your dairy entry seems to be that GBP hasn’t fallen further from the recent $1.24 and Euro 1.15, well I suppose that is some comfort, but then by comparison the Pound was at about $1.48 and Euro 1.33 just before the referendum last year.

    1. Edward2
      March 30, 2017

      The point you miss is that many experts said the Article 50 letter day would create a shock which would result in a significant fall in the pound.

      Despite their doom laden predictions this did not happen.

      1. Jerry
        March 31, 2017

        @Edward2, Trying to pick an argument against Eddie…

        The point you missed is the fact that our host posted his entry before knowing if any movement on the FX markets had or would have happen, The London FX markets did not close at or before 10am (the time-stamp on the first reply), two hours before the Letter was delivered to the EU and those outside of the Westminster village got sight of the detail!

        I’m glad that the markets did not move significantly but had they dropped our host (and people like you Eddie, who always jump to his defence) would have looked a little silly had it. Our host could have published his comment, to the same effect, at 5pm without worry.

  10. John B
    March 29, 2017

    Yesterday the Pound was 1,15€, today 1,16€.

    “Some said the pound would tumble more when we sent the letter.”

    We are in the age of ‘reverse prediction’. Observe the predictions of ‘experts’ and soothsayers, and expect the opposite.

  11. Paul wills
    March 29, 2017

    Just wondering if i should sell my few shares now and convert to euros then together with my savings decamp to my holiday bolthole in south of spain..i’ve already secured an irish passport so that should allow me troublefree access to the continent without problem. My house in UK is already on the lucky for me i’m already retired and secured my pension before all of this mad stuff started..

    1. Anonymous
      March 30, 2017

      Pension in sterling ? Better get that sorted out too then.

    2. a-tracy
      March 31, 2017

      Best put up for private healthcare too because if we go tits-up like you predict no money to Spain for your healthcare.

  12. acorn
    March 29, 2017

    Frankly, if I had received a six page letter like that, I would reply by telling Mrs May to stick it where the sun don’t shine!

    This is not a divorce on the grounds of “Irreconcilable Differences”, a no-fault grounds for divorce, which means neither party committed any sort of extenuating act, such as adultery, abandonment or extreme cruelty; no single party is at fault for the breakdown of the marriage.

    This is a case where one party is most definitely responsible for the breakdown of the marriage; “abandoning” the marital home by way of an Art 50 letter on the mantelpiece. From the EU point of view, this is a case of “unreasonable behaviour”.

    The UK has been a pain in the EU arse from day one, and has been intolerable to live with. Mrs May is making demands, which under the circumstances noted above; she has no reasonable grounds to insist on.

    PS. The lawyer lady says that “Irreconcilable Differences”, doesn’t work in an English Court. 😉

  13. James neill
    March 29, 2017

    Listening to the EU parliament president speaking today post the A50 letter i see they are taking a very hard line..i don’t think the UK side is going to be able to match their requirements therefore i think we are heading for a very hard brexit..i don’t see it any other way at this’s looking bad for us now.. we are really going to have to go out foreign and see about getting new deals- as i don’t think we can rely on the USA either because of the way Trump is turning out.

  14. Denis Cooper
    March 29, 2017

    Is it not typical of much that is wrong with the EU that the Empress Angela a) does not even wait for the meeting of the European Council to set their joint negotiating guidelines before publicly issuing her decree on behalf of all 27 EU governments, and b) she insists that the process adopted must be perhaps the least efficient which could possibly be devised?

    No wonder that the EU struggles to deal with its problems.

  15. Derek Henry
    March 29, 2017


    The interest rate rises in the US has weakened the $. It aint even started yet.

    I fully expect the GBP/USD to be over 1.3 by end of April.

    Money is a unit of exchange and we define it’s value by its purchasing power.

    So if a £ can buy a certain amount of goods and services that defines its value. So if that £ can now afford to purchase less of those goods and services then the value of the £ has gone down and vice versa.

    The interest rate is a price set by the Bank Of England and it is the most important price in the economy. It’s the price of credit and all other prices flow from that.

    So when the central bank raises interest rates – All other prices in the economy tend to follow. Raising the cost of credit, raises the cost of production and producers price their goods higher. This has the effect on the exchange rate as the currency goes down in value.

    When the inflation rate goes up after a hike. It’s another way of saying you get less for your money. You get a smaller amount of goods and services. This adjusts the £ exchange rate down 100% each and every time. The £ weakens.

    When a central bank cuts the interest rate. It’s like lowering prices across the entire economy. Which is another way of saying you get more goods and services for your £. This is reflected in the exchange rate going up in value.

    Interest rates are price increases by the price setter.

  16. Freeborn John
    March 29, 2017

    Merkels’s rejection of parallel discussions on trade is just a ruse to get the Uk to accept talks on handing over a £50bn exit fee. The Uk has to get serious immediately in the talks by rejecting any huge bill and saying we will not enter any talks that do not address the main issue of future trading arrangements. It is better to walk out now than agree to an agenda that separates and sequences talks to our disadvantage.

    1. Denis Cooper
      March 30, 2017

      With many projects practical considerations require that different operations must be performed in the correct sequence – Team A must finish its task before Team B can get started, and Team C must wait upon Team B completing its work, etc. This is not such a project, there is no reason why several separate areas of negotiation should not run in parallel and in view of the stated time limit common sense says they should. However the EU in general, and Merkel in particular, are not noted for common sense.

  17. Simon Ro
    March 29, 2017

    Financial markets price in risk. Once there was no doubt that the notification would be sent, there was no more risk to be balanced. The risk now being priced in is the manner of the exit. As the messages from governments waver between the extremes of WTO and interim Norway, and as the leaving date approaches, then we will see movement in the pound due to brexit.

    Currently most of the movement is due to pricing in of the likelihood of interest rate rises on the back of increasing inflation.

  18. Freeborn John
    March 29, 2017

    Newspapers in the UK and EU (Le Monde) are all reporting that May is hinting that the Uk will pay the £50bn exit fee. Her inability to negotiate is costing every man woman and child in the country £1000 each.

  19. am
    March 29, 2017

    Nothing much happened to the pound today: slightly down against dollar; slightly up against the euro. Some bods see the pound as seriously undervalued and expect it to rise to 1.32 over the year. If so the remainers will have to search for another take on things.

  20. Ex-expat Colin
    March 30, 2017

    When does the Climate Change Act and the CO2/CfD foolishness end? As with Trump we need real/career jobs rather than High Streets full of coffee/pound shops, hairdressers and delivery boys. Get energy intensive industry and related working quickly please.

    According to Ch 4 news last night Hull has 57, 000 empty residential properties available. Wonder why they are not used?

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