UK holiday-makers feel early hit from pound's new Brexit fall

[snoop1130]

UK holiday-makers feel early hit from pound's new Brexit fall

By William Schomberg

 

FILE PHOTO: UK pound coins plunge into water in this illustration picture, October 26, 2017. Picture taken October 26, 2017. REUTERS/Dado Ruvic/Illustration

 

LONDON (Reuters) - For millions of people in Britain, the timing of sterling’s latest pre-Brexit fall could not have been worse, coming just as they prepare to head abroad on their summer holidays.

 

Clients at a money exchange shop in London’s Canary Wharf financial district said they were feeling the hit after the pound this week sank close to a decade-low against the euro and not far off its lowest level in 34 years against the dollar.

 

“I’m disappointed rather than surprised,” Gary Lacey, a 54 year-old bank cashier, said after settling for an exchange rate of less than 1.07 euros to the pound before he began a four-day trip to Austria.

 

He recalled the much stronger euro-sterling rates of the early 2000s, before the pound was pummelled by the global financial crisis and then by Brexit.

 

“The days of 1.60 are probably long gone,” Lacey said. “But you have to pay or you just don’t go on holiday.”

 

Britain’s holiday-makers are feeling the most immediate hit of the recent fall in the value of the pound which has lost about 7% of its value against the euro since mid-May.

 

That was when the Brexit crisis gripping British politics began to push Theresa May towards her resignation as prime minister in July.

 

Her successor Boris Johnson has taken a tougher line with Brussels, spooking investors by promising to take Britain out of the European Union on Oct. 31 without a deal to soften the economic shock, unless the EU rewrites May’s exit deal.

 

“With all the uncertainty over Brexit, I can’t see the pound’s weakness going away any time soon,” Lacey said.

 

For some in Britain, the fact that the pound has traditionally bought more than one unit of other currencies around the world, with the exception of some oil states, has been a source of pride.

 

Now analysts are working out the likelihood of the pound falling to parity against the euro and dollar.

 

Sterling’s current three-month slide has not been as dramatic as its 10% plunge against the dollar and 6% euro drop in the space of a few hours on the night of the Brexit vote.

 

But unless there is a quick reversal in foreign exchange markets, it will push up inflation soon, hitting the spending power of the consumers who have helped the economy through the Brexit crisis.

 

THE POUND AND POLITICS

 

What is less clear is whether the fall will hamper Johnson and his ability to take Brussels to the wire over Brexit.

 

The careers of at least two former prime ministers were fatally wounded by big drops in the value of the pound as Britain struggled to come to terms with the decline of its once world-leading economy after World War Two.

 

Harold Wilson was lampooned by cartoonists and comedians in 1967 when he told voters that the “pound here in Britain, in your pocket” would not change value after a devaluation.

 

Twenty-five years later, John Major was humiliated after his government was outwitted by investors, chief among them George Soros, who forced the pound out of the Exchange Rate Mechanism.

 

To date, the most recent fall in sterling is not likely to be severe enough to cause the kind of upswell in public opposition that would force Johnson into a U-turn with Brussels.

 

“What would make a big difference is if the pound is worth less than the euro,” Natacha Postel-Vinay, an assistant professor who teaches financial history at the London School of Economics, said.

 

“That would carry a lot of symbolic meaning for people.”

 

While more extreme than all forecasts in a Reuters poll of foreign exchange analysts, published nearly a month ago, sterling-euro parity does not look completely beyond the realms of possibility in the event of a no-deal Brexit.

 

This week, Capital Economics, a consultancy, said the pound would fall to 1.05 euros, down from about 1.10 now, if investors fully priced in a no-deal Brexit, but there were risks that it could fall more.

 

By contrast, if a no-deal Brexit is avoided, sterling would bounce back to between 1.13 and 1.17 euros, Andrew Wishart, an economist with Capital Economics, said.

 

INFLATION RISK

 

Not everyone thinks a fall in sterling is a bad outcome from leaving the EU.

 

Brexit supporters have long said it will help Britain’s exporters and rebalance Britain’s economy with its large current account deficit which leaves the country reliant on investment flows from abroad.

 

But there has been scant evidence of a trade boom since the pound plunged after the Brexit vote in 2016.

 

Furthermore, the fall in the value of the pound is widely seen as a sign of Britain’s diminished attractiveness as an investment destination, which could aggravate its balance of payments problem.

 

What’s more clear is that inflation will probably rise soon as the cost of imports goes up, putting the squeeze back on household incomes.

 

In July, supermarket chain Tesco increased prices on around 1,000 products, citing cost pressures which included the fall in the value of the pound.

 

The Bank of England has said it cannot guarantee that it would cut interest rates at help the economy after a no-deal Brexit because of inflationary impact of weaker sterling.

 

The National Institute for Economic and Social Research estimates that if there is a no-deal Brexit, inflation would double to 4% by the end of 2020, when the economy is likely to be stagnating or worse.

 

“Overall that isn’t good for living standards,” NIESR economist Gary Young said.

 

“We will have to pay more for foreign goods and foreign services, such as and holidays which we spend quite a lot of money on. Ultimately, it would mean we are worse off.”

 

-- © Copyright Reuters 2019-08-01

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[darksidedog]

6 minutes ago, snoop1130 said:

Britain’s holiday-makers are feeling the most immediate hit of the recent fall in the value of the pound

Expats are taking a bigger hit. They are abroad all the time, many with frozen pensions, watching their standard of living declining by the day. Sterling has lost a third of its value since the Brexit vote and by all accounts it is going to get worse before it gets better.

[worgeordie]

Is there no good news coming from the UK ?

or is it all doom and gloom,I wonder if there

is a point where buying Sterling could pay off ?

I suppose the only ones that know will be the

speculators,earning money off others misery,

regards Worgeordie

[Ralf61]

8 minutes ago, darksidedog said:

Sterling has lost a third of its value since the Brexit vote

right, but, unfortunately, USD and EUR don't perform that much better. EUR down from 50 to 34 (approaching 33)

[BritManToo]

Just now, Ralf61 said:

right, but, unfortunately, USD and EUR don't perform that much better. EUR down from 50 to 34 (approaching 33)

And the Aussie, NZ and Canadian dollar.

[tomacht8]

3 minutes ago, Ralf61 said:

right, but, unfortunately, USD and EUR don't perform that much better. EUR down from 50 to 34 (approaching 33)

True.

The Brexit pound tears the Euro down with it.

That of the recent fall in the value of the pound which has lost about 7% of its value against the euro since mid-May,

That is no comfort if you must change Euros for Thai Baht.

 

[Sophon]

1 hour ago, Ralf61 said:

right, but, unfortunately, USD and EUR don't perform that much better. EUR down from 50 to 34 (approaching 33)

That's not even close to being true.

On 23rd of June 2016 the GBP/THB exchange rate was 52.05, it's now at 37.45 (down 28%).

On 23rd of June 2016 the EUR/THB exchange rate was 39.87, it's now at 34.10 (down 14%).

 

The EUR/THB rate hasn't been close to 50 since 2009.

 

Sophon

[nobodysfriend]

13 hours ago, snoop1130 said:

“With all the uncertainty over Brexit, I can’t see the pound’s weakness going away any time soon,” Lacey said.

Prepare for the worst , it can and probably will go down much more . Boris is a liar and dreamer .

[Emdog]

My heart goes out to my British friends and the crap sandwich that is the pound. I hope they return the feeling when dollar goes deep south

[Chomper Higgot]

Brexiteers have moved on from assuring us of ‘a price worth paying’ to now insisting no price is being paid.

 

And of course, any price that might be being paid is somebody else’s fault.

 

 

 

Edited August 2, 2019 by Chomper Higgot

[sammieuk1]

Its a distant memory now of getting more baht this exchange than last as retirement becomes just an existence and regrets are more than just a few being forced to do it someone else's way????

[Chomper Higgot]

15 minutes ago, sammieuk1 said:

Its a distant memory now of getting more baht this exchange than last as retirement becomes just an existence and regrets are more than just a few being forced to do it someone else's way????

Is that a confession or a short story you are working on?

 

It comes across as ‘confused’.

[sammieuk1]

1 hour ago, Chomper Higgot said:

Is that a confession or a short story you are working on?

 

It comes across as ‘confused’.

Think there was a song there somewhere but I cant remember it now????

[evadgib]

18 hours ago, darksidedog said:

Expats are taking a bigger hit. They are abroad all the time, many with frozen pensions, watching their standard of living declining by the day. Sterling has lost a third of its value since the Brexit vote and by all accounts it is going to get worse before it gets better.

But it will get better and might already have started if we'd left on time.

Edited August 2, 2019 by evadgib

[Nip]

What's presently being discussed is just the monetary affect on Sterling abroad. Note also Boris's buddy not supporting the UK in the recent Iran shipping affair. Sign of things to come? Up next the problems of living in and travelling to the favourite living and tourist destinations of the Brits. Dust off your passports and those of your pets and wait for the queues at the ports and the more bollicky Boris gets the more finicky the EU member states will get with regard to foreign tourists. As an outsider I cant see any logical reason to walk away from the largest market in the world in favor of the corner shop. 

[evadgib]

5 minutes ago, Nip said:

What's presently being discussed is just the monetary affect on Sterling abroad. Note also Boris's buddy not supporting the UK in the recent Iran shipping affair. Sign of things to come? Up next the problems of living in and travelling to the favourite living and tourist destinations of the Brits. Dust off your passports and those of your pets and wait for the queues at the ports and the more bollicky Boris gets the more finicky the EU member states will get with regard to foreign tourists. As an outsider I cant see any logical reason to walk away from the largest market in the world in favor of the corner shop. 

Have you seen 'the Godfather'?

[DoktorC]

42 minutes ago, evadgib said:

But it will get better and might already have started if we'd left on time.

Yes, there's a light at the end of the tunnel. And it's a train.   Or probably more appropriate

 

 

[sawadee1947]

Send a bill to Boris. He's the big spender 

[Basil B]

Things are getting bad for the Brits looking forward to their two weeks in the sun...

Two more package holiday companies collapse.

"Super Break and Late Rooms holiday firms go into administration"

Quote

Two package holiday firms have collapsed, affecting more than 50,000 travellers.

Malvern Group, which incorporates Late Rooms and York-based Superbreak Mini Holidays, known as Super Break, has ceased trading.

The group said Super Break hotel-only holidays would be cancelled and people currently on holiday might have to pay again.

https://www.bbc.co.uk/news/uk-england-49200999

 

 

[evadgib]

9 minutes ago, DoktorC said:

Yes, there's a light at the end of the tunnel. And it's a train.   Or probably more appropriate

I'm not entirely sure where you're going with that but it's my opinion and you are entitled to it.

Edited August 2, 2019 by evadgib

[CNXexpat]

19 hours ago, Ralf61 said:

right, but, unfortunately, USD and EUR don't perform that much better. EUR down from 50 to 34 (approaching 33)

When was the Euro at 50 Baht? Must be a very long time ago. Since the Brexit the GBP fall much more than every other currency. Also to the Euro and the USD.

 

Edited August 2, 2019 by CNXexpat

[joecoolfrog]

21 hours ago, worgeordie said:

Is there no good news coming from the UK ?

or is it all doom and gloom,I wonder if there

is a point where buying Sterling could pay off ?

I suppose the only ones that know will be the

speculators,earning money off others misery,

regards Worgeordie

The speculators by and large know nothing more than most of us , they are simply gambling , you or I could do exactly the same if desired.

It also should be noted that some traders will take the long view , ie speculate on Sterlings eventual recovery. You might say they would then be earning money from others happiness.

Edited August 2, 2019 by joecoolfrog

[joecoolfrog]

2 hours ago, evadgib said:

But it will get better and might already have started if we'd left on time.

Yes it will get better , but quite literally some of us may well be dead and buried before that happens.

As for leaving on time , Boris and his pals ( along with Corbyn ) are to blame for that. A deal was agreed and ready to go , it was rejected by those chasing a fantasy that never was and never will be achievable.

[Atens4]

Bath is simply too strong, hurts exports. at the same time prices goes up, Visa getting expensive.

[puipuitom]

21 hours ago, darksidedog said:

Expats are taking a bigger hit. They are abroad all the time, many with frozen pensions, watching their standard of living declining by the day. Sterling has lost a third of its value since the Brexit vote and by all accounts it is going to get worse before it gets better.

1) As everybody with some insight in economy, finance and forex already forecasted. Still, the mayoralty of pensionario's in Thailand voted for a Brexit according Thai Visa. 'Who burns his bottom, must sit on the blisters"

2) Developing country are no "ape countries" anymore. Look to Thailand and compare that with 30 years ago. Lots of factories built with modern machinery, competing with the "Old Western" economies. Slowly but surely they will arrive close to the Western World, with.. a much stronger own currency. Japan and South Korea went ahead, China followed, and now Malaysia, Thailand, and after Vietnam.

Edited August 2, 2019 by puipuitom

[puipuitom]

After a small recovery, the GBP continues on its path towards "one once"… 

Enjoy your €uro-countries holidays, as next year, it could be only the British shores… ( ok. no need for a Schengen-visa also) 

[Baerboxer]

9 hours ago, Chomper Higgot said:

Brexiteers have moved on from assuring us of ‘a price worth paying’ to now insisting no price is being paid.

 

And of course, any price that might be being paid is somebody else’s fault.

 

 

 

 

Of course. And they claim a low pound helps exporters and will help the balance of payments.

 

So if imports get more expensive, they think the UK exports will suddenly grow so much that they'll not only offset the increase costs of imports but also help balance them.

 

They really do believe in Unicorns, Boris, the 350m per day to the NHS etc etc etc.

 

Like May, they've lost contact with all reality and soak up the Boris Farage Kool-Aid.

[Baerboxer]

2 hours ago, joecoolfrog said:

Yes it will get better , but quite literally some of us may well be dead and buried before that happens.

As for leaving on time , Boris and his pals ( along with Corbyn ) are to blame for that. A deal was agreed and ready to go , it was rejected by those chasing a fantasy that never was and never will be achievable.

 

Only it was a crap deal - a deal remainers, leavers. committed Brexiters, economists, bankers, journalists and sandwich shop owners all recognized as crap.

 

The folly all along was stupid arrogant May thinking she called fool all factions in her party, parliament and the public and be everything to everybody. Article 50 should not have been invoked without very clear plans, strategies and consequence risk management.

 

Now Boris the Buffoon plays to the gallery and pretends he's another Trump.

 

 

[Black arab]

Disaster capitalists rubbing their hands over this, lots to be made Farage, Rees mogg etc.Not to worry things will be fine in maybe 50 yrs (rees mogg).

[kingdong]

On 8/1/2019 at 11:57 AM, darksidedog said:

Expats are taking a bigger hit. They are abroad all the time, many with frozen pensions, watching their standard of living declining by the day. Sterling has lost a third of its value since the Brexit vote and by all accounts it is going to get worse before it gets better.

if we,d got out 3 years ago we,d have been on the road  to recovery now,what with the changes to the retirement visa rules can see a lot of expats having to return home.