Sterling versus euro long term

Cyrus

Folks

I am interested in what economists medium to long term view is on the value of sterling to the euro. Has anyone read any good articles lately that they could point me to?

ED 209

I think it comes down to interest rate v interest rate. I am bearish on both currencies.

Cyrus

Cyrus wrote: »

Folks

I am interested in what economists medium to long term view is on the value of sterling to the euro. Has anyone read any good articles lately that they could point me to?

\begin standard zaraba rant:
You can't invest in currencies, only speculate and anyone who claims otherwise is lying.

However, saying that you can look at the macro profile of the UK versus the main euro countries who have a tangible impact on the ECB. Throw in the fact that euro is also a major partner of the dollar (and hence USD movements can effect EUR rates) and you can start to form a rough sketch of the main, fundamental drivers of the currencies which you are interested in. However, applying my caveat, fundamentals are now the be all and end all of currency movements, so there is also a stochastic element at work.

www.voxeu.com gives good, readable articles on topics such as the above and the contributors are both academic economists and ones who also engage in the markets so there is a decent mix of view points.

Anonymous1987

Deleted User wrote: »

You can't invest in currencies, only speculate and anyone who claims otherwise is lying.

However, saying that you can look at the macro profile of the UK versus the main euro countries who have a tangible impact on the ECB. Throw in the fact that euro is also a major partner of the dollar (and hence USD movements can effect EUR rates) and you can start to form a rough sketch of the main, fundamental drivers of the currencies which you are interested in. However, applying my caveat, fundamentals are now the be all and end all of currency movements, so there is also a stochastic element at work.

investing: the act of investing; laying out money or capital in an enterprise with the expectation of profit

In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum.

At what point is investing distinguishable from speculation? or is speculation just viewed as an extremely risky form investing? Sorry if its a bit obvious but I thought it would good to clarify because aren't all investments even bonds risky to some degree?

Essentially, the difference is risk.

You can invest into bonds - there are well defined realtionships and theories. You know what you are going to get back and how this money will be earned. There is risk, but it is well defined and understood.

Same goes for stocks, although the latent (systematic) risk is higher. However, again there are well defined relationships and processes.

Speculation is when these processes don't exist - you don't have a solid level of information regarding what is driving your speculative action. You can of course build strategies that engage in speculation in bond and equity markets, however, it is pretty much impossible to engage in investment in currencies. The market is just too inefficient and, for want of a better term, wild.

Naturally, you can make very high returns from currency speculation, but corresponding risk is very high.

Hasschu

The way I look at it one can make a pure currency bet by investing in Gilts (UK) Treasuries (US) or Euro bonds. Or an asset/currency bet by buying stocks, property etc. denominated in one of those currencies. In asset allocation it is usually useful to reduce risk by investing in foreign assets. Currency risk is notoriously treacherous because governments always talk about their faith in their currency and how they will staunchly support it come hell or high water. Simultaneously they can be making every effort to undermine their currency and inflate their way out of debt. My feel for it is that the Euro is a relatively stable consensus currency while the Pound is subject to the vagaries of a single government whose policies can change in a flash. I have no doubt but that the US is weakening its currency and is likely to be successful. The commodity currencies Australia, Canada are vulnerable to Chinese hoarding and a drop off in business. China itself is vulnerable to domestic problems and a drop in exports.My first exposure was Brazil where my pocket of notes was divided by 5 overnight, unforgettable, how could it happen.

Hasschu

http://www.nakedcapitalism.com/2010/01/could-england-be-the-next-iceland.html

Is England the Next Iceland ?

Ireland is lucky to be flying below the radar.

Yves Smith is a banking consultant with good connections.

Économiste Monétaire

There's a key point in the OP's post I would like to point to:

Cyrus wrote: »

I am interested in what economists medium to long term view is on the value of sterling to the euro.

Given that they're asking what economists think,

SLUSK wrote: »

Britain has not got much going for it, large national debt. Thanks to the incompetent leadership of the labour government they had deficits when the economy was much better.

When the oil supplies dry out in the north sea they do not have anything of value left.

I am also bearish about the Euro since this currency is under threat because the different countries don't really give a damn about the stability pact and run high deficits.

I'm curious why you're posting an opinion?