According to the Remain campaign, if the pound falls against the dollar that shows investors have fears about Brexit. In recent days the pound has been rallying against the dollar. They have gone quiet. Is this a reappraisal by investors, who now see the substantial gain to our balance of payments from leaving? The pound fell from $1.47 to $1.38 between January and the end of February, but has since improved to $1.44.
If we take up the Remain view that investors are mainly moved by Brexit considerations and have been so far this year, then we can see that investors have some good thoughts on the advantages of Brexit. So far this year the number of jobs is up, vacancies are up, and a record number of people are in work. The Remain fears that Brexit worries would damage the jobs market have so far proved inaccurate.
The cost of government borrowing has gone down since the end of last year. The cost of borrowing ten year money has fallen from 1.99% to 1.4%. Why don’t the Remain people hail this as a substantial improvement, and see that implies investors are positive about Brexit? The US in contrast has to pay 1.8%a year to borrow for ten years.
Then there is the prediction that inward investment will dry up. At a time when German investors are keen to take a majority share in a merged company with the London Stock Exchange ahead of the vote, it is difficult to sustain this argument. Various industrial businesses with five year investment programmes have confirmed they are not going to cancel if we vote to leave.
I think the Remain campaign exaggerate the impact of Brexit on the economy and on markets. Sterling has been falling against the dollar since last summer, as have other currencies, mainly on forecasts of rising US interest rates. The pound fell from over $2 in 2008 to $1.4 in 2009 when we were firmly committed to the EU, so we know other influences can generate large sterling movements. Whilst I would like to claim hopes of Brexit as the main cause of lower interest rates it is as difficult to do so as to claim Brexit caused the fall in sterling. Advanced country bonds have generally been rising in price with the European and Japanese authorities both heavy buyers of their own paper.