For the past couple years, the British Pound rallied every time it appeared Theresa May might get her deal though or there would be an extension.
Today, vs the US dollar, the Pound fell to its Lowest Level Since 2016.
The Wall Street Journal reports Pound Pushed Toward Historic Low as Investors Worry Over Brexit.
The British pound slipped closer to its lowest sustained level against the dollar in more than 34 years on rising investor fears of economic disruption if the U.K. quits the European Union without a deal to smooth its exit.
Two days of heavy selling pushed the currency as low as $1.2091 on Tuesday, according to FactSet. That is still above its lowest level since the Brexit vote, when it finished European trading hours at $1.2065 in January 2017. If it breaches that level, the pound would be at its weakest against the dollar since early 1985, when it almost reached parity.
“People had thought that Boris Johnson may soften his stance once he was in power, but now the market is realizing that a no-deal Brexit is a very real possibility,” said Seema Shah, chief strategist at Principal Global Investors in London.
Mr. Johnson won a vote among members of the U.K.’s ruling Conservative Party to become leader, subsequently replacing Theresa May as prime minister last week. He has since named a leadership team packed with politicians determined to get out of the EU by the next deadline of Oct. 31 by whatever means necessary.
Reality Sets In
Reality has finally set it.
The UK Prepares for No Deal: Attorney General Says Early Elections Can’t Stop Brexit
From the perspective of the UK and EU, the pound vs the Euro is far more important.
Pound vs Euro
Since April 27, the pound has fallen 7.3% vs the Euro.
Pound Rising and Falling on Brexit News
The pound’s major free fall started in 2014 before the referendum and has been trading in a Brexit news range since.
The pound is now testing the lows hit several times in the past three years.
Mike “Mish” Shedlock
Looks like UK will be the first country to experience that central banking nirvana: out-of-control inflation, since it runs huge trade deficits. So there will be a model to follow…
A cheaper British Pound makes trade with Britain more attractive.
Only by making brits poorer, hence willing to work for less.
And WTO tariffs negate that advantage by making trade with Britain LESS attractive. So in the end, you’re left with savings that are worth less, pensions that won’t go as far or last as long, vacations priced out of reality and into dreams, and eating Spam instead of lobster. Congratulations on turning your currency into toilet paper. Not that you’ll need it much for even that when all you have to eat is your pride.
UK doesn’t have to have any tariffs at all. WTO is a framework. They can be set to zero on imports. Others can impose on exports from UK but its complex when raw materials are set at zero for UK imports. Manufacturer raw material costs reduce.
“They can be set to zero on imports.”
Which, by WTO rules, you would have to do for everybody. So please do set all your tariffs to zero, and let the rest of us dump whatever we want on you while maintaining our own tariffs against YOUR goods. Let the rest of the world undercut all your businesses while keeping you out of our markets. Oh, and if you have zero tariffs and our goods get into your stores for free, why in the world would anyone, ANYONE enter into a trade deal with you? YOU’D HAVE ALREADY GIVEN US UTTERLY UNOBSTRUCTED ACCESS TO YOUR MARKET. If you can’t even think one single step ahead, do yourself a favour and keep that fact to yourself.
No. Read up on WTO and how tariffs have to be applied. The capital liberated via reduced input duties are used to increase competitiveness via internal incentives.
“The WTO prohibits discrimination between trading partners, but provides exceptions for environmental protection, national security, and other important goals.”
But not for nut job countries who want to negotiate for less than they already have. For some pipe dream to sell stuff they don’t make to markets they have yet to set the goals posts with.
But Im sure wage competition with Asia will motivate those plucky Brits 🙂
No. The move out of the EU is to restore control over leglal elements that any sovereign nation should have. Lacking those elements no nation can be considered sovereign.
Before anyone states the obvious – UK not in the euro – there was a desire for all EU countries to be in and there still is. Result, all controls handed to a central authority supposed to develop one size fits all policies on the important stuff.. Borders, money, military.
Great until there is a crisis and no one knows who they are fighting for and it all turns to crap.
Interoperable systems are sensible, product standards are sensible, central planning is another matter. It didnt work in the USSR and it won’t work in China or the EU. All are cousins.
But it’s article tell bad things, if BCE increase rate, it isn’t because of Euro crisis, but they are problem with two enemy currency the chinese yuan and the US dollar.
The pride is on the EU side. Their language has been awful.
Their true fascism showing through. Somethings never change.
Oct 31st soon upon us.
“Their language has been awful.”
Like what? “Sorry, we can’t give you what our rules and your red lines rule out”? Welcome to the world of the grown-ups, kid.
“Their true fascism showing through.”
For example…? Or is anything you don’t happen to like “fascist”?
When passengers first get in, the lifeboat always appears less comfortable than the sinking ship. Smart people are heading toward the life boats, but initially a tiny life boat looks scary compared to the size of the sinking ship. But the ship continues to sink, and after a little while the lifeboat looks a heck of a lot better.
The EU is collapsing, with or without UK.
That is what the forex rate is telling us. We are scared piling into the tiny life boat in the middle of the big ocean. But we know it must be done, the EU ship is sinking.
Drivel.
remainers are getting so desparate they are resorting to name calling like little children.
Your napolean like experiment to force Europe together failed little man. Time to accept the facts
The British aren’t getting in a lifeboat. They’re diving out of one. They’re bleeding and waving to the sharks to come be their friends. Canada, no less… a country born of empire; Britain’s first dominion, a stalwart ally who leapt to their defence in the Boer War and World Wars I and II, are sitting back, waving off the offer of rolling over CETA to the Brits, and waiting to see just how mangled the British are going to come out of Brexit, because even they want to see what kind of concessions they can wring out of the Mother Country when she’s desperate and on the ropes. But they sure as hell aren’t going to give up or compromise CETA to do it. And that, THAT right there should be telling the British something about how stupid an idea a no-deal Brexit really is, when even their kin are eyeing them like vultures.
Please study it. Canada cannot be seen to engage uk until uk is out. It’s part of the rules. Needless to say theres more taking place than you know.
“Canada cannot be seen to engage uk until uk is out.”
Canada could have done exactly what Trump’s done and bloviate about a great trade deal. There’s nothing in law that says Canada can’t openly propose to roll over CETA for the UK; only that it can’t actually do it or legally negotiate it till the UK is out of the EU. They could still state it as their goal. They haven’t. They’re waiting till you’re desperate to pick you apart. Most countries are.
Tell Trudeau.
Again, do basic research on a speech he gave 2 years back.
Also, what happened at G20, please enlighten us on that.
That might be the case if Canada keeps it’s soyboy government. I sincerely hope not.
“That might be the case if Canada keeps it’s soyboy government. I sincerely hope not.”
Yeah, I’ll bet you do. Sorry, but other countries elect their governments to look after their own interests. Not yours.
I don’t know if you understand the economy, but there are a market with 66.04 millions of people (the UK), and a market with 511.8 millions of people (UE). For the market it’s many interest to assocy with UE than UK.
If you doesn’t it’s you have ideology that you can’t. But it’s not Economy it’s ideology, and I think M. Trudeau will associate with the bigger market.
It’s that capitalism, I doesn’t think to explain to the US what is capitalism, and where it’s your interest.
So, won’t this make the UK’s goods more competitive abroad? The UK’s GDP has been stair-stepping down since they joined the EU. Getting out will allow them to negotiate their own trade deals with the US, China, and the rest of the world.
If this is the reaction to no deal what happens when MR Market realises that the UK current account deficit makes the UK model unsustainable? We are not America, we can’t run deficits sine die. Sooner or later the rest of the world will make the UK live within its means.
Sooner or later, everyone – including the US – will have to live within their means. The whole post-Bretton Woods monetary arrangement allowed this to go on for as long as possible. The end of the road is now front and center.
I don’t agree. I listen to all the fiat money detractors and and I think that they don’t understand that the dollar is backed by military might. I don’t see how the dollar can be forced of its pedestal in the forseeable future. Of course wealth creates power and power destroys wealth but who do you see that can rival America?
American military might has been squandered with nearly two decades of Forever War misadventures. The MIC is constructed to bomb people into the stone age, not occupy anything or “win” any real war. Planes and bombs cost tons of money, which is why we have so many and use them at every opportunity. Intentional inefficiency is catching up with us.
Trump is waffling on an Iran war because it would be far worse than Afghanistan or Iraq. Nobody has to outgun us, they have to wait while we spend ourselves to oblivion. Remember the $1.48T Pentagon budget we passed last week? All that money and nothing to show for it except rising resentment.
Unfortunately many dollars have been wasted protecting freeloaders that want to knock the US $ off its perch with the €.
When the EU begins to spend was is needed to defend itself watch the debt rise further or the social spending have to tank. UK can at least cut military spending and pull back from wasting money on those that wish us harm and only take.
Mattis, as Defense Secretary was on record complaining that 70% of young adults in the US are unfit for military service due to obesity, illiteracy, drug use, etc. Our military is capable of being nothing more than a nuisance to our adversaries at this point.
But avidremainer is not an american like you, but an Irish people, probably North Ireland people, and when Tater-Man call UK england, I understand that he take badly
On an absolute basis,@Bam_Man is 100% right about post Bretton Woods.
On a relative basis, England has the upper hand because they at least accept there is a problem. The EU is in denial. Life is going to get REALLY bad on the continent.
England? England? Don’t you mean the UK? England does not accept there is a problem.
Technically you are correct, albeit overly pedantic. The British make a distinction between England and UK — an artifact of when there used to be an global empire.
I used England and UK interchangeably. Being on that tiny little island saved England/UK from Hitler’s efforts to unify Europe; and being an island might save England/UK from Brussels too.
Your ignorance is staggering. Here is a geography lesson:
Britain = England + Wales
Great Britain = England + Wales + Scotland
UK = Great Britain + Northern Ireland
“Sooner or later the rest of the world will make the UK live within its means.”
“the UK” doesn’t live withing any means. It doesn’t live at all…… Only individual UKers do….
And most of them already do live within, or even below, their means. Courtesy of having ever larger shares of their output forcibly transferred, by Central Banks and the rest of the “asset” propping rackets, to a bunch of half literate, idle “asset owners”, “asset rights squabblers” and “asset transferrers”. Who hence get to live way above theirs.
The sooner that whole racket is more thoroughly carpet bombed than Berlin was in ’45, the better off most UKers will be. Splintering the racket sustaining “system” into smaller entities, by complicating cross subsidies and increasing arbitrage opportunities, will most likely hasten that day. Which makes doing so a good thing.