Sterling has started the week already on the back foot, dropping around 0.75% against the US dollar and the euro, as the markets get used to a weekend of opinion polls and squabbling in government. However, as we discovered two weeks ago, the smaller trades in the Asian markets can have an oversized effect which could reverse, but doesn’t always.
An interesting week for data in the UK starts quietly today, but tomorrow we have unemployment and earnings and on Wednesday it’s GDP.
Last month the economy surprised everyone by growing – albeit by only 0.2% – but the forecast again this month is for a fall.
But what of the long-term future for sterling?
I saw an interesting graph yesterday, showing sterling’s decline over the past 150 years. It showed a steady decline from the days of $5.50 to the £1, via the happy days of the gold standard ($4.87), some tricky years through the first half of the 20th century, and then via a couple of devaluations and globalisation to the present situation, barely above parity.
Another interest graph doing the rounds at the weekend showed the contribution of CO2 the UK made to the world, going from just about 100% in the second half of the 18th century at the start of the industrial revolution, to only a little over 0% today.
Whichever way you look at it, the UK is a different country – not better or worse, just different – at the start of the 21st century and we had better get used to sterling being much smaller.
Set against that, we shouldn’t be surprised to see sterling at parity or lower in the near future against the euro or dollar.
To lock in today’s rate, which for GBP/EUR is still just about above the past five-year’s average, call you trader on 020 8108 5163.
This week we will be publishing our new quarterly forecast, so do watch out for that email and see what I believe are the worst downside predictions we’ve seen in the years Smart has been producing them.
