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

301–310 of 379 posts

Re: British pound hits record low against the dollar

#301

Post by plasticchris »

lottin wrote: post #184
plasticchris wrote: post #164

Earlier quoted context omitted.

Pay your workers in cheap local currency, sell in strong foreign currency.

So how does a cheap currency benefit Germany according to this theory? Another thing is that if production costs go down (although you don't say why they're going down, it seems a random assumption on your part), then competition among exporters will drive the price of exports down. I mean, this is Economics 101.

So, this only works if a large part of the cost is labor (this is the model china used in the last few decades) in which case the cost of production definitely goes down. I'm no expert in Germany's economy, maybe they have more materials / energy cost that they need to pay for in their home currency?

Re: British pound hits record low against the dollar

#302

Post by asplake »

everybodyknows wrote: post #284
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…

> 500,000 people are in a similar position to me. Do not despair; watch for hints of a coming bailout. Bankrupting half a million voters has to look like poison to elected officials. One more economically rational option in future, for example, would be imposing a principal "haircut" on lenders, down to some assessment of the by that time reduced market prices of comparable homes.

I wouldn’t count on it – didn’t happen last time round

Re: British pound hits record low against the dollar

#303

Post by BerislavLopac »

rr808 wrote: post #5

Crazy times it wasn't long ago that a pound bought over $2. The interesting thing this week is that the most fragile and indebted country that the EU has bailed out for 30 years straight (Italy) has elected a govt that doesn't like the EU. Good times ahead.

When was that exactly? The highest I can see in the last 10 years was $1.7 in 2014... [0]

[0] https://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y

Re: British pound hits record low against the dollar

#304

Post by woodruffw »

denton-scratch wrote: post #290
woodruffw wrote: post #19

Earlier quoted context omitted.

I'm no economist, but intentionally cutting themselves out of a massive common market probably isn't helping much.

The UK has not cut itself out of the European market, any more than the US is excluded from trading in Europe.

I said common market. The UK is no longer in the EU common market[1], and is thus in the exact same position as the US.

Unlike the US, however, the UK was previously in the EU common market. As a result, the global economy is now correcting for the UK's newly diminished trade efficiencies with the EU, whereas nothing has substantially changed for the US.

[1]: https://en.wikipedia.org/wiki/European_single_market

Re: British pound hits record low against the dollar

#305

Post by blibble »

kypro wrote: post #285
mobiuscog wrote: post #266

Earlier quoted context omitted.

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…

The mistake I made was dramatically underestimating the volatility. I always understood rates could move up, but if they were going to have trended up to 5% in 10 years then that wouldn't be such a big problem because wages would have moved up by then and I would be able to slowly pay down the mortgage to keep repayments the same. Plus I could also afford 5% rates. The issue with fixes is that you pay a premium for f…

> The issue with fixes is that you pay a premium for fixing longer term and you also risk interest rates being lower going forward than you fixed for.

this is the essence of the interest rate swap (which is what you're actually buying when you "fix")

the person on the other side of the transaction is betting that the rates will rise, and you're betting that they won't

> A lot of the fixes also have early repayment charges and the longer-term fixes can have very large early repayment charges (5%+).

this is the fee for exiting the swap early, which has to exist otherwise person who bought the other side would never be able to make a profit on it (and hence no-one would ever write one)

Re: British pound hits record low against the dollar

#306

Post by asplake »

tialaramex wrote: post #256
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…

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…

The Euro area may be more important as a trading partner, but it’s a big problem for energy and other commodities priced in USD. We’ll be importing inflation.

Re: British pound hits record low against the dollar

#307

Post by nine_zeros »

mFixman wrote: post #291
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…

I'd expect rents to raise at least as much as mortgages, so until the next 2008-style house price crash nobody who bought a house during the pandemic is losing money.

> I'd expect rents to raise at least as much as mortgages, so until the next 2008-style house price crash nobody who bought a house during the pandemic is losing money.

This rise in rent stops as soon as unemployment starts increasing, which in the US it already has.

Re: British pound hits record low against the dollar

#308

Post by chitowneats »

lm28469 wrote: post #218
chitowneats wrote: post #197

Earlier quoted context omitted.

It's funny how Trump and Brexit have become these catch-all bogeymen that every societal ill is reflexively attributed to.

If the government can't be blamed for results who can lol

The voters.

Re: British pound hits record low against the dollar

#309

Post by onlyrealcuzzo »

outside1234 wrote: post #267
onlyrealcuzzo wrote: post #254

Earlier quoted context omitted.

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 normali…

> 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.

The percentage of bonds bought by this type of investor is so small that the ECB, BoE, BoJ, and FED aren't even giving them consideration.

The only reason anyone in their right mind would buy a 10-year treasury from the BoJ at negative interest rates is if they feel like the BoJ will eventually buy back the worthless bond from them for even more money than they bought it for originally.

Traditionally, this has been a pretty safe bet - because the entire economy of Japan is dependent upon the BoJ paying people endlessly more money for the same worthless garbage...

Re: British pound hits record low against the dollar

#310

Post by avn2109 »

lottin wrote: post #142
currenciessfe wrote: post #91

Earlier quoted context omitted.

It's not that simple. Germany wanted a country like Italy in the Euro so it would pull the currency down and not allow it to appreciate too much (like the Deutsche Mark did). That would would be very bad for German exports.

Having a weak currency means you're selling cheap and buying expensive, so it's not clear how it benefits you. It certainly benefits everyone else.

I'm not the OP, but as far as I know there is no economic faction which disputes the claim that "a weak currency boosts exports."

I spent 5 minutes googling this out of curiosity and could only find published claims in favor of the orthodox "weak currency boosts exports" idea, for example "Export dependent nations may actively encourage a weak currency in order to boost their exports." [0] or "Exports become cheaper when the currency of a nation is weak."[1]

[0] https://www.investopedia.com/terms/s/weak-currency.asp [1] https://thebusinessprofessor.com/en_US/economic-analysis-mon...

If there are published claims to the contrary, I would be interested in reading them.

Post reply on HN