Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

British pound hits record low against the dollar

cnbc.com

Post reply on HN
Print view View original

261–270 of 379 posts

Re: British pound hits record low against the dollar

#261

Post by pbak »

Workaccount2 wrote: post #242
photochemsyn wrote: post #210

It's worth noting that there was an apparent real opportunity to resolve the Russia-Ukraine conflict in April 2022, via diplomatic negotiations, but UK's Boris Johnson reportedly disrupted those talks by threatening to withdraw UK/US support for Zelensky if he proceeded with negotiations. If the war had been resolved and sanctions on Russian export of gas to Europe had been lifted, this would have lowered gas prices…

Even if your claim is true, it still would have been the smarter long term move to keep the war going. The prospect of a western aligned russian regime is so valuable it's worth fighting (and funding) the war for.

Well, yes, if you are blind to the problem of said war definitively and massively causing the Russia people to be irretrievably unaligned against the West for generations.

But, seems a lot of western leadership is blind.

Re: British pound hits record low against the dollar

#262

Post by goldenchrome »

kypro wrote: post #252

So the bigger news here imo is what's happening in the bond market. It's now expected that the BoE will increase rates above 6% by the middle of next year. Most people in the UK are on fixed rate mortgages, most of which are 2-3 year fixes. Those who brought a home during the pandemic or fixed at a low rate typically fixed at around 1-2%. I personally fixed for 2 years at a rate of 1.7% just over a year a go when I m…

Hindsight is 20/20. No one knows what the future holds for sure, so don’t be too hard on yourself.

I like to take a stoic approach to my decision making when I’m in a situation like yours. If you need to sell your house and move into a flat for a few years before you repurchase a house, no big deal. As long as you’re trying your best, I’m quite confident that someone like you can give your family what they need. That’s all that matters.

Re: British pound hits record low against the dollar

#263

Post by sprkwd »

shellac wrote: post #248
ndsipa_pomu wrote: post #203

Not really surprising that there's a lack of confidence in the untested combination of reducing tax (for high earners) and increasing borrowing. At first glance, that would seem to be a recipe for high inflation.

> untested combination of reducing tax (for high earners) and increasing borrowing Oh, it was tested: in 1972 the Conservative government tried this, and it didn't go well.

It seems like folks don't learn from their mistakes / history.

Re: British pound hits record low against the dollar

#264

Post by pbhjpbhj »

ctrlmeta wrote: post #213
ndsipa_pomu wrote: post #203

Not really surprising that there's a lack of confidence in the untested combination of reducing tax (for high earners) and increasing borrowing. At first glance, that would seem to be a recipe for high inflation.

It does seem like a recipe for high inflation. But I want to understand why they chose this combination? Why play such a big gamble? There has to be some logic behind making this choice. But what is it? Were there other safer alternatives that they could have gone with? What could be the reasons for choosing this combination over those safer alternatives?

I don't see what you think is a gamble, Tories will get rich from this budget; the ever increasing borrowing of Tory governments is wrecking chances for future Labour (or PR, I hope) governments to fix that. It's win-win for Tories.

No government with morals could do the sort of borrowing + tax cuts that the Tories are doing. That means down the line a moral government has to be austere and have higher taxes, and so the people will just vote in the Tories again. Only complete societal collapse will stop that cycle ...

Ergo having a climate change denier in charge of business and energy is a good thing! /s

Re: British pound hits record low against the dollar

#265

Post by denton-scratch »

Akronymus wrote: post #257
tialaramex wrote: post #256

Earlier quoted context omitted.

If it's about the US dollar, what important US economic news landed early in the morning US time ? For the UK the consideration is that this basically happened as the Chancellor announced his intent to fund huge tax cuts for the wealthy by borrowing. You don't need a whole lot of specialist knowledge to figure out that means the government has to sell more bonds and isn't in a position to reject higher prices for tho…

> isn't in a position to reject higher prices for those bonds Not lower? Or am I misreading it?

I struggled with that phrase too. I think "higher prices" means the government has to pay more to borrow money (i.e. issue bonds).

Re: British pound hits record low against the dollar

#266

Post by mobiuscog »

kypro wrote: post #252

So the bigger news here imo is what's happening in the bond market. It's now expected that the BoE will increase rates above 6% by the middle of next year. Most people in the UK are on fixed rate mortgages, most of which are 2-3 year fixes. Those who brought a home during the pandemic or fixed at a low rate typically fixed at around 1-2%. I personally fixed for 2 years at a rate of 1.7% just over a year a go when I m…

You could look at the other side of things - following on from remembering how high interest rates had been, when I bought my house 20 years ago, I fixed for 5, then 10 years and am currently in the middle of a second 10-year fixed rate of around 3.5% - it was previously around 5%.

I've been paying 'over the odds' if you look at how interest rates have since turned out, as you mention most people paying around 1.5->1.7% for many years, and so I've often seen myself as 'losing out'.

However, I fixed the rate to ensure I had a known amount of expenses that I could afford.

Neither is 'stupid' - they just have different volatility and risk.

Re: British pound hits record low against the dollar

#267

Post by outside1234 »

onlyrealcuzzo wrote: post #254
pwinnski wrote: post #251

Earlier quoted context omitted.

For the purposes of attracting capital, that consistent history hurts them, no? Investors want higher rates, not lower, in this case.

Few foreign investors are buying UK & European treasuries. It's mostly the ECB and BoE - and local pension funds mandated by local governments - so foreign investors are irrelevant. General investors usually prefer low rates because they want their asset prices to be inflated.

If investors you mean people taking out shorter dated loans to buy higher expectation yield securities (aka "the carry trade"), then yes, they want lower rates.

But for investors choosing between a basket of interest bearing sovereigns, they will choose the bond that has the largest risk adjusted rate of return 101% of the time.

This is what you are seeing in exchange rates, the exchange rates are swinging to normalize this risk. (ie. There is an appropriate amount of premium in investing in USD that balances the currency exchange rate risk of the exchange rates swinging back on you.)

Re: British pound hits record low against the dollar

#268

Post by denton-scratch »

mcv wrote: post #233
rossdavidh wrote: post #209

I'm not sure it's so much a story of the British pound, as of the US dollar, given that the pound-euro exchange rate is still well within it's range for the last 5 years: https://www.xe.com/currencycharts/?from=EUR&to=GBP&view=5Y The Chinese yuan and Japanease yen are also both at their lowest value vs the dollar in recent years, and moving faster than they normally do. For each of these (UK, EU, China, Japan) there…

So it's not the pound plummeting, but the dollar recovering.

No, it's the pound plummeting.

Basically, nobody thinks that Kwarteng's extreme tax changes make any sense. Not even in his own party, apart from a tiny gang of nutters. He's planning an enormous increase in government debt, so he can give money to people who already have too much. His tax-cut plans are inflationary.

Meanwhile, the Bank Of England has a mandate to keep inflation within a window that it's already moved out of. So the Bank is required to increase interest rates. Kwarteng and the Bank are therefore pushing in opposite directions; Kwarteng's moves will tend to heat the economy up, interest rate rises will try to cool it down. I wouldn't be surprised if rates rise to 15%.

So the rich people who benefit from these tax cuts will invest their loot overseas (or in property); and overseas investors will steer clear, until we've got rid of these fanatics.

Truss/Kwarteng have no mandate for this nonsense; the only mandate they have is to "Get Brexit Done", and it's done. So the government is now skiing off-piste. It's disgraceful that this gang of crazies have managed to take over the government on the strength of the votes of about 80,000 Tory party members, without ever presenting a manifesto to the nation.

Re: British pound hits record low against the dollar

#269

Post by lottin »

currenciessfe wrote: post #207
lottin wrote: post #178

Earlier quoted context omitted.

I just Googled it, and this is what I found [1]: When a country's currency appreciates in relation to foreign currencies, foreign goods become cheaper in the domestic market and there is overall downward pressure on domestic prices. In contrast, the prices of domestic goods paid by foreigners go up, which tends to decrease foreign demand for domestic products. A depreciation of the home currency has the opposite effe…

Read again carefully what you quoted. It exactly supports my claim. > Export dependent nations may actively encourage a weak currency in order to boost their exports. > A weak currency may help a country's exports gain market share when its goods are less expensive compared to goods priced in stronger currencies. The increase in sales may boost economic growth and jobs while increasing profits for companies conductin…

Do you read your own quotes?

Where does it support your claim that a weakened currency does not affect the price of exports?

It says the exact opposite. Exports increase because they become less expensive:

> A weak currency may help a country's exports gain market share when its goods are less expensive compared to goods priced in stronger currencies. The increase in sales may boost economic growth and jobs while increasing profits for companies conducting business in foreign markets

Re: British pound hits record low against the dollar

#270

Post by origin_path »

triceratops wrote: post #259
tialaramex wrote: post #256

Earlier quoted context omitted.

If it's about the US dollar, what important US economic news landed early in the morning US time ? For the UK the consideration is that this basically happened as the Chancellor announced his intent to fund huge tax cuts for the wealthy by borrowing. You don't need a whole lot of specialist knowledge to figure out that means the government has to sell more bonds and isn't in a position to reject higher prices for tho…

I don't understand. If the government is forced to accept higher interest rates for those bonds, wouldn't that drive up the value of GBP?

The government isn't forced to accept higher rates. They control the central bank and can force the BoE to buy government debt at whatever interest rate they like. At one point in the past I think Osborne actually forced the BoE to quietly return to the Treasury all the interest payments the government had been making to them! However, shifting bonds from external lenders to the BoE is money printing and will create inflation + lower the value of the currency. So lower currency value is effectively a bet that the government will stop bond rates rising too much by making up the difference via printing.
Post reply on HN