Pound rises against Euro

For all those who like to explain movements of the pound on the basis of Brexit news, they should be saying today the pound rose because Parliament voted to keep no deal on the table. The pound is stronger now than before the vote.

As regular readers will know, I think the pound’s movements are usually the result of other economic and market forces.

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  1. hans christian ivers
    Posted February 15, 2019 at 6:41 pm | Permalink

    Sir, JR

    Currency movements are a number of many different elements
    1) Economic, growth, balance of payments, trade balance, inflation, monetary policy, inflation
    2) Political elements, government stability, country stability, democratic institutions ,future prospects, political stability.

    All elements which have an influence on the currency value, excluding one from another does not make sense and it has to be looked at with all elements being considered simultaneously, saying one like Brexit has no implication makes no sense on its own.

    • Edward2
      Posted February 15, 2019 at 9:49 pm | Permalink

      You list many reasons that currency values change yet because of your obsession with Brexit you end by trying to claim it is the main reason.

      • Woody
        Posted February 16, 2019 at 1:26 pm | Permalink

        Clearly the exact opposite response can be given to your comment… your obsession with remaining will always make your claim any “bad” news is due to brexit. Good news of course wont be, will it !!!

        • Edward2
          Posted February 16, 2019 at 5:40 pm | Permalink

          No that is not the way I think.
          The pound goes up and down against the Euro and the Dollar for many reasons.
          As hans said in his post.
          Brexit is just one of the reasons.
          But for many remainers evety downward movement is because of brexit and every upward movement is despite brexit.

    • NickC
      Posted February 16, 2019 at 11:14 am | Permalink

      Hans, No-one can genuinely predict the future, but the short term (1 to 2 years) effect of Brexit (assuming we actually Leave) – once the instantaneous reaction has worn off – is unlikely to be much different from now.

      The UK will trade less with the EU and more from the rest of the world – a trend that has been ongoing for years. The EU will continue to stagnate; what happens in China, India, and USA will have a far greater effect. And central banks will have far more effect than that.

  2. Simon Coleman
    Posted February 15, 2019 at 7:04 pm | Permalink

    You live in a world of economic stats but you’re about as business-friendly as Michael Foot.

    • hans christian ivers
      Posted February 15, 2019 at 10:39 pm | Permalink

      Simon Coleman,

      Considering I live off business every day I will ignore your comments

      • NickC
        Posted February 16, 2019 at 11:22 am | Permalink

        Hans, Your claim to live off business every day is merely an argument from authority. It is not rational. Many of us with diametrically opposite views to you, live off business every day.

        We don’t ignore your comments (you didn’t ignore Simon’s actually) because you confirm almost every day how silly Remains are to contend that the UK cannot be independent of the EU like New Zealand, Japan, etc.

    • Lifelogic
      Posted February 16, 2019 at 3:49 am | Permalink

      The privately educated Michael Foot, for all his daft economic policies, was at least a democrat (and one who was quite bright despite having chosen to read PPE at Oxford). He was against appeasement and against the anti-democratic EU. The people sensibly rejected his economic policies preferring Thatcher’s by a very large margin.

      Faced with a choice between appalling disingenuous, socialist, Appeaser May and the bonkers lefty Corbyn it may be that the people will actually choose Venezuela Corbyn.

  3. Duncan
    Posted February 15, 2019 at 7:36 pm | Permalink

    Brexit hasn’t happened yet..how exchange rates will be after 2300hrs 29th march will be the real test. How the financial markets will react when the stock markets reopen on 1st April will tell a lot..starting in the early hours with new zealand..only a few weeks to go

    • Edward2
      Posted February 15, 2019 at 9:51 pm | Permalink

      They might fall and then they will come back.
      As it has happened many times before.

    • Lifelogic
      Posted February 16, 2019 at 3:52 am | Permalink

      Well not really markets are already reflecting people’s opinion of what will happen in the future. Investors do not wait for the actual event they attempt to predict it in advance.

    • NickC
      Posted February 16, 2019 at 10:58 am | Permalink

      Duncan, If Theresa May gets her way there will be no Brexit anyway. We will be out of the existing EU treaties, then back in with new treaties for a deep and special subservience worse even than the original.

  4. John Hatfield
    Posted February 15, 2019 at 7:57 pm | Permalink

    But you’re a leaver John. Remainers know that bad news is because of Brexit. Good news is despite Brexit. Which is yet to happen.

  5. Susan C. Ogonovsky
    Posted February 15, 2019 at 8:15 pm | Permalink

    I have just latched onto your comments while waiting for JRM to return to LBC after the news. A huge thank you for your consistent and wise observations on Brexit.
    Hopefully, soon more MPs might also reflect on them and do what is sensible and right for the UK.
    Best wishes,
    Sue Ogonovsky

  6. Lifelogic
    Posted February 15, 2019 at 8:36 pm | Permalink

    The dire PM John Major said that if we left the ERM interest rates would have to rise even further. We left and they fell like a stone. Now the same sort of dopes say that leaving the EU will be a “catastrophe” or a “cliff edge”. These dopes are just as wrong now as they were over the Euro and the ERM.

    • Sir Joe Soap
      Posted February 15, 2019 at 10:11 pm | Permalink

      I’d reckon the £ at EUR 1.30 within 12 months as the EU realise they just blew it with a big customer, now headed to buying mainly from the Anglosphere.

      • NickC
        Posted February 16, 2019 at 11:00 am | Permalink

        Sir Joe, Every one of your purchases that is not from the EU is another small victory.

      • Leslie Singleton
        Posted February 16, 2019 at 11:25 am | Permalink

        Dear Sir Joe–I might be wrong but are we not in fact the EU’s biggest, not just a big, customer? As I say I am not sure but I can understand that if we are nobody would gues the way the EU behaves towrads us.

  7. Lifelogic
    Posted February 15, 2019 at 8:43 pm | Permalink

    So lots of school children took the day off to protest about catastrophic climate change. It rather shows their lack of understanding of real science. If they think you can predict the temperature of the earth in 100 years (even if we knew all the unknowable input variables) and control it by just controlling man made CO2 then they clearly have little or now grasp of science, logic, reason or reality. They need better science teachers.

    • agricola
      Posted February 15, 2019 at 9:26 pm | Permalink

      So climate is changing, it has done since the Earth was created. The driving energy source behind it is the Sun. When the Sun dies so does the Earth with it. The Sun , and it’s activity is the governing force in climate change. None of the climate change soothsayers have ever to my knowledge apportioned the balance between the Sun and mans activities. The chosen preference is to blame man and panic tax him. It never occurs to them that it is succesive governments who bave been in control and have failed in their duty of care. Governments react after the event they never anticipate largely because they exist on a five year tenure. I am all for a clean well ordered living environment , but government cannot even collect household waste in any logical uniform way.

      If government wish for what I wish they have to take the electorate with them , not use them as the scapegoat. A touch of science based honesty would not go amiss.

      • Lifelogic
        Posted February 16, 2019 at 8:08 am | Permalink

        Indeed but the earth is doomed rather before the sun actually dies out as it starts going into the red dwarf stage – but we do with luck have about 7.8 billion years. Unless a meteor impact or nuclear war gets us first I suppose.

      • A.Sedgwick
        Posted February 16, 2019 at 9:05 am | Permalink

        Absolutely, but the BBC in all its guises says the science is settled – a bit like Pravda.

      • Martyn G
        Posted February 16, 2019 at 11:42 am | Permalink

        You’re correct – the sun is the engine that drives the earth and when major solar disturbances occur (flares, coronal storms) have caused major problems on earth, like when a large part of the USA experienced significant power shut downs from being hit by intense solar discharges. Those who study the sun are observing that the sun has become remarkably inactive and some posit that it might be moving into another prolonged quiet period. That has happened before – for example during the ‘Maunder Minimum’ period the sun went quiet for 70 years around 1645 and 1715, during which time ice fairs were held on the Thames and its impact on crops caused shortages of food across Europe.
        The year 1816 during the ‘Dalton Minimum’ is known as the ‘year without a summer’. That happened because in 1815 Mount Tambora in Indonesia had catastrophically exploded – perhaps the largest explosion on earth for thousands of year – and temperatures across northern Europe fell, again resulting in crop failure and shortages of food. However, there is a weak but significant statistical link between decreased solar output and increased volcanic activity on earth, so if the sun is undergoing another quiet period, it could last for decades temperatures could fall, not rise as predicted by those who ignore the engine that drives the earth. Falling temperatures and perhaps increased volcanic activity will certainly not please those support the global warming theory.

      • hefner
        Posted February 16, 2019 at 2:59 pm | Permalink

        “None of the climate change soothsayers have ever to my knowledge apportioned the balance between the Sun and man’s activities”. Your knowledge is somewhat lacking in width and depth: the study of external forcings, not done by soothsayers, has been there (done by solar physicists for the Sun variations in the IPCC reports since the very first one in 1990.
        A review of the efforts “Measurements of total and spectral solar irradiance: Overview of existing research” by Eltbaakh et al., 2010 might be interesting.
        A paper by Krikova and Solanski, 2002, “Solar total and spectral irradiance: Modelling and possible impact on climate” addresses the links with climate.

        • Edward2
          Posted February 17, 2019 at 8:19 am | Permalink

          Yet the important predictive computer programmes used by all climate science give a much higher sensitivity weighting to CO2 than they do for sun activity and water vapour.
          They were adjusted a tiny amount after 2000 when the predicted large rises in temperatures did not happen but then the mix of satellite temperature data and earth temperature readings were altered to reduce the impact of satellite data which showed less rises.

          • hefner
            Posted February 17, 2019 at 7:57 pm | Permalink

            What are your references for these adjustments? In particular the adjustments to “satellite temperature data and earth temperature readings”.
            Thanks in advance.

    • Beecee
      Posted February 15, 2019 at 9:34 pm | Permalink

      It is probably the teachers who got them out there protesting.

      • Lifelogic
        Posted February 16, 2019 at 8:14 am | Permalink

        Teachers do often seem to be lefty, green crap pushing arts graduates I find. Heavily female too especially at primary schools (85%/15% and 62%/38% at secondary).

    • Edward2
      Posted February 15, 2019 at 9:52 pm | Permalink

      I dont criticise their passion for political involvement.
      But there is plenty of time at the weekend.

      • Ian wragg
        Posted February 16, 2019 at 8:28 am | Permalink

        It’s half term so they get an extra day off.

      • Anonymous
        Posted February 16, 2019 at 9:57 am | Permalink

        I object to the fact that the ones in my circles (of Remain voting middle-class stock) pontificate about the planet and yet consume far more of the earth’s resources than me or my brood ever does.

        The fly on four foreign holidays a year (paid for by a dad who travels the globe every other week) to eco friendly destinations. They live in an eco friendly house on the sight of a perfectly pleasant one they demolished.

        • Anonymous
          Posted February 16, 2019 at 9:59 am | Permalink

          These kids should give up their new gaming boxes and smartphones and weekly purchases of fashion shop disposable clothing and trainers before they even think about telling government what to do.

          • Rien Huizer
            Posted February 17, 2019 at 2:26 pm | Permalink

            @ Anomymous

            Is your inability to keep up with your fashionable neighbors related to your anonymity?

      • MickN
        Posted February 16, 2019 at 10:53 am | Permalink

        Wouldn’t it be a nice gesture to help save the planet if they all refrained from recharging their mobile devices for a month. Not going to happen though is it?

      • a-tracy
        Posted February 16, 2019 at 10:57 am | Permalink

        Is it a wise move to encourage the next generation to march, waving placards on working days? Do we want to turn into France – burning tyres in the road, stopping trade, smashing shop windows and burning cars because that’s where these sorts of peaceful protests end up when you rile people up. The way to force change is through our local Councils, our MPs, and while we have them our MEPs., I would much have preferred these children to be shown how to have their say through their representatives, but socialism has always found a way to subvert democracy and these teachers, many of whom I’m guess have never worked outside the academic system are tainted with their only teaching their own personal views and it disgusts me.

    • Richard1
      Posted February 15, 2019 at 10:42 pm | Permalink

      As taxpayers we pay £10bns pa to provide education for children. It is an outrage that they are encouraged to play truant, and that teachers are able to skive off work with impunity, to launch a political protest. Why not do it in the school holidays or at least at weekends? What next, a ‘strike’ against Brexit perhaps, or in favour of a socialist government such as that which Corbyn and his like have supported in Venezuela for so many years?

      • a-tracy
        Posted February 16, 2019 at 11:00 am | Permalink

        We need to push back against this.
        Teachers are spreading unrest.
        Are the parents to be prosecuted for taking the day off, protesting in the street isn’t an expected way to achieve your goals in the UK and is not something we should just turn the other cheek over. A show of force is to over rule democracy – really this is what we want our institutions to teach?

    • James
      Posted February 15, 2019 at 11:40 pm | Permalink

      An excuse can be made for schoolchildren having a lack of understanding. What is inexcusable is politicians, and others thinking they can control the temperature of the world. The whole notion is to say the least utterly absurd. So called experts within the Met office admit that they cannot forecast with any degree of accuracy weather conditions and temperature changes more than a few days ahead, yet they cheerfully trot out opinions of what temperature levels will prevail at the end of the century. The ‘Global Warming’ nonsense (now referred to as ‘Climate Change’ due to a lack of warming) is so silly as to be laughable.

    • Lifelogic
      Posted February 16, 2019 at 3:59 am | Permalink

      An absurdly one sided climate debate on Newsnight with the dire Sir Ed Davey. He even wanted the economically idiotic “Lagoon” projects to be brought back. What a complete plonker, no understanding or energy, engineering, economics, logic or science – Oxford PPE yet again – needless to say.

      Posted February 16, 2019 at 10:01 am | Permalink

      it’s you man-made climate change denialists that need to go back to school.
      Those children chanting ‘F**k Theresa May’ will be voting to see off whoever’s replaced her after the disaster of Brexit next time around.

      • a-tracy
        Posted February 16, 2019 at 11:04 am | Permalink

        This Richard J Moore statement is what this protest was about in truth, painting the Tories into a corner, the socialists now have control of our educational establishments and Sir John if people like you don’t deal with this and expect these schools to teach a diplomatic official way to make their protest as an alternative to marching and shouting obscenities then you will have failed.

        It is not a schools job to teach one-sided politics and it is time these teachers and lecturers are dealt with. We are paying for this education and I expect a neutral political bias.

        • hefner
          Posted February 17, 2019 at 8:16 pm | Permalink

          I agree that “it is not a school’s job to teach one-sided politics”. But could it be that teenagers, 13 to 17 years old, might have read about/seen on the news the various events (floods, fires, hurricanes, decreasing ice in polar regions, …) in the recent years and decided by themselves that the overall situation in some parts of the world appears to be deteriorating. And could it be that having roughly seventy years of life ahead of them they are feeling a bit anxious at what is coming.
          BTW that’s exactly what my 14 year old grandson is going through.

          And before you ask, I see him only 3-4 times a year, neither his parents nor I endoctrinated him. (And he did not miss school last Friday).

          • a-tracy
            Posted February 18, 2019 at 9:28 am | Permalink

            These school teachers on a working day took students out on a political crusade, shouting obscenities about the Tories when they should be learning. I have no problem with them learning all about climate change I am not a denier. However, we are supposed to have a proper democracy in the UK and representatives, the children could have been taught how to approach them, how to set up an online petition for a discussion on this in the house, they could have asked for an official meeting at the local council meetings after school hours with their parents to supervise them or the teachers.

            Whipping children up like some previous political groups did, only offering one side of the debate is not education its indoctrination. It’s propaganda. If it was important to all these children they would have done it in the school holidays surely. Before you say the last day of term isn’t spent on work then I believe this needs investigating, it is not an extra day off.

            Ask your grandson would he mind if the adults decided that has a result of the children’s climate worries there will be no more transport to school, they all have to go to the one closest for them to walk to if within 2 miles. They have to give up all their electrical gadgets. No more airplane travel. Just what exactly do they want? What sacrifices are they willing to make for it.

      • NickC
        Posted February 16, 2019 at 11:30 am | Permalink

        Richard J Moore, Your comment is not engaging on any rational level at all.

    • miami.mode
      Posted February 16, 2019 at 12:18 pm | Permalink

      Perhaps these children should use their favourite technological gadgets to use a search engine to ascertain the huge amounts of electricity needed throughout the world to power their gadgets.

  8. agricola
    Posted February 15, 2019 at 8:56 pm | Permalink

    You may well be better qualified to interperet the movement of sterling than I. I have a baser interperetation which is a desire to make a profit. Up or down the opportunity to make a profit is there. At the moment I don’t think we should attribute anything beyond this to sterlings movements. When Brexit is resolved it may put sterling on a new path.

  9. formula57
    Posted February 15, 2019 at 10:09 pm | Permalink

    The Bank should intervene in currency markets to covertly manage the FX rate so occurrences like that you describe do not occur whilst so many remoaners are in such a fragile state. Will no-one think of the impact upon the NHS?

  10. margaret howard
    Posted February 15, 2019 at 11:24 pm | Permalink

    Yes, it’s been a bumpy ride on the old euro-train. Back in the heady days of 2000, it was only worth an average of 61p. So far this year, the average value is 88p. That’s up by over 40%.

    I wonder what you consider bad news?

    • acorn
      Posted February 16, 2019 at 7:31 am | Permalink

      Sterling is back where it was after the 2008 crash and for the same reason.

    • Denis Cooper
      Posted February 16, 2019 at 8:22 am | Permalink

      One man’s bad news can be another man’s good news, but in this case there is really no news of any great significance as can be seen from this chart of the trade weighted sterling index over the past three decades:


      There are some major movements there, but nothing of any significance which can be unequivocally attributed to the vote to leave the EU or even to the government’s trashing about during what it represents as the process of leaving.

      • Martin
        Posted February 16, 2019 at 10:15 am | Permalink

        Suggest you look at the date Mr Cameron announce the EU referendum – December 2015. I remember it well as I forgot that announcement was coming and failed to buy my holiday currency for 2016 at that rate.

        The Pound crashed from 92% and has never recovered to that level. It has been rattling about between 75% and 80% ever since.

        • Denis Cooper
          Posted February 17, 2019 at 7:34 pm | Permalink

          I suggest you look at it, and notice that the sterling index had already started on its way down in August 2015 and there was no break in that pre-existing downwards trend in December 2015, and nor again in the following June. You’ve been provided with hard detailed information, you don’t have to rely on your possibly unreliable memory.

    • NickC
      Posted February 16, 2019 at 11:35 am | Permalink

      Margaret Howard, And all that happened whilst the UK was in the EU. Not a good advert for being part of the EU is it?

  11. /IKH
    Posted February 16, 2019 at 5:57 am | Permalink

    Hi John, your post is some what rhetorical perhaps. To make a point.

    I expect the a ‘no deal’ Brexit is pretty much priced in to the current value of the pound. If we cancel ‘article 50’ or leave with ‘a deal’ then I would expect the pound to rise as the markets would see the status quo as less risk than the unknown of ‘no deal’.

    However, if we leave on WTO terms or ‘no deal’ then if disaster does not follow with the ports operating normally and no shortages of food, medicine, and components for manufactures the I would also expect to see the Pound strengthen.

    I also hear that the EU is threatening Ireland with a border in the English Channel. That would likely cause Irish gilt prices to fall and a rise in interest rate for Irish Govt borrowing.

    It seems like Mr Varadkar’s chickens are coming home to roost with him trying to use the Good Friday Agreement as a stick against the UK.


    • Rien Huizer
      Posted February 16, 2019 at 3:10 pm | Permalink

      @ /IKH

      You van flow market thinking quite easily and the consensus is basically that a hard brexit (especially a no deal or “WTO” version) is considered bearish for sterling, especially against both EUR and USD, because of the underlying expectation that the BoE (as it has indicated) is morelikely to lower the policy rate (and possibly buy more GBP fixed rate assets thus also pushing the yield curve down) . Conversely, in the case of a non-disruptive outcome (and especially if the UK remains integrated in the overall European economy), the BoE policy would tend to revert to normal policy rates for an economy operating at capacity (I am aware of Mr Redwood’s view on Taylor-inspired monetary policy and especially rate-setting which is partially plausible) and with inflation of various types safely away from deflationary levels. The likely steady increase in interest rates combined with pressures in the economy (pent up investment demand from businesses deciding to remain in the UK after all) would probably sesult in a fairly shapp rise in GBP/USD and GBP crosses that would, over time, partially offset the CA effect of the relatively weak GBP since mid-2016.

      Of course whatever the market thinks the BoE will do and how the market will respond whenever the BoE does whatever, is anybody’s guess. Your best guess is that the current market reflects all available information.

  12. miami.mode
    Posted February 16, 2019 at 12:13 pm | Permalink

    Currency traders only make money if exchange rates constantly change, and it is in their interests that any sort of comment by a senior politician or policy maker will be seized upon to change a rate in some way. This will be in addition to normal changes due to international trade or to a particular country’s general political policies.

  13. Rien Huizer
    Posted February 16, 2019 at 2:56 pm | Permalink

    Mr Redwood,

    Your observation that GBP/EUR moved up during the past 36 hour is correct. However, you should have mentioned that this simply cancelled out a downward move during the days before the increase started, resulting in ending up on 15/2 at basically the same rate as 13/2. The re can be few fundamental reasons. Of course the BoE inflation report was somewhat disappointing (no reason for a policy change) and also of course the random movement of British politics promised compromise at one moment and conflict at another.

    But all in all, there was no meaningful rise or fall.

    Interested readers can check this very easily by looking at the Reuters Currency converter page that has a very flexible graphing function.

  14. Anonymous
    Posted February 16, 2019 at 11:33 pm | Permalink

    364 economists wrote to Geoffrey Howe in 1981 to warn his budget was wrong. They were the ones who were wrong.

  15. Lindsay McDougall
    Posted February 17, 2019 at 4:58 pm | Permalink

    In the two years after Brexit, a low pound will be helpful to us in gaining new export markets and promoting import substitution. After that, we can expect the pound to harden.

  16. a-tracy
    Posted February 17, 2019 at 5:27 pm | Permalink

    After reading more about these children’s climate change protests today, I’m none the wiser of what specifically the children want the government to do. I’m not a climate change denier. I welcome technological advancements through invention, innovation and change of habits like reusing bags which I did for years before charges came in.

    Many of these placards were political digs at Tories Michael Gove D- etc. What has that got to do with their climate change protest? National Socialists in the past used children for their propaganda this isn’t amusing.

    The 200 academics encouraging this protest – ok – what do you want to change tomorrow. Should all children under 16 not be allowed to use any energy after 9pm, no tv, no ipads, phones etc. a curfew. Indeed how about if they all gave up their phones think of the energy saving, my generation didn’t have mobile phones.

    How about if all under 18 fashion was banned, they all have to wear cheap, locally sourced natural fibre clothing, no dies that aren’t natural, no synthetics.

    No flights for children, no foreign holidays, no excessive travelling out of where they live.

    No make up use it’s a waste, no under 18 fans of football travelling around the uk. If children want to save the world what are they going to give up personally as a cohort? Lead from the front children, put your energy use to sacrifice for the greater good. There you go Tories they’ve given you permission.

    None of these things I’ve asked them to sacrifice were available to me under 18, it’s not a hardship.

  17. a-tracy
    Posted February 17, 2019 at 5:41 pm | Permalink

    Furthermore, since when was the last day of the term ‘an extra holiday type day for teachers and pupils’, like the woman on Marr suggested this morning? That’s six days per annum! Is this actually true? I checked with my children they said the opposite, it was a last chance to get any work finished, get revision and project ideas for the break, sports events.

    I would not have allowed my children to do this on a school day, if the teachers felt so strongly for this then why not organise it for Monday? By all means protest in your own time but not when we’re paying your wages.

    To me this just shows how unfairly and easily manipulated children are by teaching staff.

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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