# The Jumping Pound



## nigele2 (Dec 25, 2009)

Are there any economy wizards around who could suggest why at 09:45 yesterday (17th March) the pound was reset 0.75 cents higher against the Euro and much the same against the dollar? the rise was abrupt and yet I cannot find the reason. Such a large change is quite rare so I would have thought there was a major incident.

Hopefully it was not a computer glitch and will be corrected later 

I noticed it more than I normally might as I went to London and changed pounds to Euros yesterday. That said my excellent independent money changers gave me 1.10 commission free despite that being pretty much the opening middle for the day. I assume they were buying Euros at say 1.12. Yes they had a queue outside (I waited 15 mins) but if they can make a profit on a 2 cent spread why do the banks offer such terrible rates? 

Also note wadges of good UK news in the last 48 hours :clap2: - fingers crossed it lasts for all those dependent on the pound.


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## jojo (Sep 20, 2007)

I noticed that it has picked up a bit, I put it down to it being discovered that the UK hadnt borrowed as much as they thought they had!? (how come they didnt know FFS??????) 

Dont worry, I'm sure they'll find a reason to bring it back down again

Jo xxxx


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## mrypg9 (Apr 26, 2008)

Most likely because UK unemployment figures were a lot better than expected and the euro was down as no concrete bail-out package for Greece has as yet been set up and Greece has mooted the possibility it might have to approach the IMF. Repayment for its existing loans is due sometime towards the end of this month, I think.
I need to change a very large amount of sterling into euros soon as I like to pay our rent in six months chunks in advance and a slight variation in the rate could cost/save £hundreds.
Oh for a crystal ball.....


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## chrisnation (Mar 2, 2009)

Terrible rates from UK banks? Simples! They always have and they always will. The reason [a.t.mo] is that they are all in deep doodoo, including owing squillions to UK taxpayers, and need to squeeze every drop from every unsuspecting punter. 

That's why my credit card rate has gone from 11%ish to 19%ish despite the Bank Rate coming down to nearly nothing.

I was once advised by a Lloyds counter-clerk to forget changing money with her and to go to the Middle Eastern bank next door. I did indeed get a far better rate.

I just thought up a word to describe such a person - an honest banker - a franker. As opposed to a dishonest banker, who is, as we all know, a J. Arthur ...


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## jojo (Sep 20, 2007)

mrypg9 said:


> Most likely because UK unemployment figures were a lot better than expected .....


I saw that on the news this morning. And then some silly woman came on to explain that this may looked good, but the reason wasnt because there were more people in work, but there were less people looking for work and claiming! More school leavers going on to further education, more 50+ retiring early..... ! Thats the trouble with the UK, they just cant stand good news, they have to p*** on it!

Jo xxx


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## owdoggy (Jul 23, 2008)

Nope, yer all wrong! It was because muggins 'ere transferred a lumper about 5mins beforehand.................. bollox!



Doggy


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## nina874 (Mar 13, 2010)

owdoggy said:


> Nope, yer all wrong! It was because muggins 'ere transferred a lumper about 5mins beforehand.................. bollox!
> 
> 
> 
> Doggy


Gutting!!! It must drive you demented when you have to watch the rates and jump, not looking forwards to that bit.


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## nigele2 (Dec 25, 2009)

mrypg9 said:


> Most likely because UK unemployment figures were a lot better than expected and the euro was down as no concrete bail-out package for Greece has as yet been set up and Greece has mooted the possibility it might have to approach the IMF. Repayment for its existing loans is due sometime towards the end of this month, I think.
> I need to change a very large amount of sterling into euros soon as I like to pay our rent in six months chunks in advance and a slight variation in the rate could cost/save £hundreds.
> Oh for a crystal ball.....


It can't be Greece or the Euro as the change impacted the pound/dollar. Yes the unemployment being down, the borrowing being less, Watford winning a football game, but as far as I'm aware none of them occurred at 09:45 on Wednesday. The change was not a normal change. Just wondered if anyone knew the specific event. I assume it cannot be a trade as you would need to buy billions of pounds in one moment and who would be doing that doggy


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## mrypg9 (Apr 26, 2008)

jojo said:


> I saw that on the news this morning. And then some silly woman came on to explain that this may looked good, but the reason wasnt because there were more people in work, but there were less people looking for work and claiming! More school leavers going on to further education, more 50+ retiring early..... ! Thats the trouble with the UK, they just cant stand good news, they have to p*** on it!
> 
> Jo xxx


Talking the £ down seems to be our national pastime. Will Hutton, the economist and political pundit,, said recently that just as in war time, there should be censorship of news in times of economic crisis.
Not sure I'd go that far but Robert Peston and his ilk have a lot to answer for, imo.
And of course the 'threat' of a hung Parliament is depressing the value of sterling against all currencies so the recent opinion polls could be affecting the £.
I was rather taken with a comment from a poster on one of The Guardian blogs thats/he was so disillusioned with all the Parties that s/he was intending to draw a huge penis on the ballot paper.....


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## jojo (Sep 20, 2007)

mrypg9 said:


> Talking the £ down seems to be our national pastime. Will Hutton, the economist and political pundit,, said recently that just as in war time, there should be censorship of news in times of economic crisis.
> Not sure I'd go that far but Robert Peston and his ilk have a lot to answer for, imo.
> And of course the 'threat' of a hung Parliament is depressing the value of sterling against all currencies so the recent opinion polls could be affecting the £.
> I was rather taken with a comment from a poster on one of The Guardian blogs thats/he was so disillusioned with all the Parties that s/he was intending to draw a huge penis on the ballot paper.....



Maybe they should start a campaign and get everyone to draw large penis's on their ballot papers!!! Cos quite frankly thats about all thats worth putting on our ballot papers!!!! 

This hung parliament thing may not be as bad as they make out tho. I know all the governments are similar shades of grey and a waste of space individually, but stick em all in together and they may actually come up with some policies worth having

Jo xx


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## mrypg9 (Apr 26, 2008)

jojo said:


> Maybe they should start a campaign and get everyone to draw large penis's on their ballot papers!!! Cos quite frankly thats about all thats worth putting on our ballot papers!!!!
> 
> Jo xx


Having considered the matter for a few moments, I'm inclined to the view that the person who said they were going to do that was a woman....
Not sure why I think that
I once wrote on a ballot paper for a local election that I couldn't vote for any of the candidates as I knew them all personally and thought they were all equally silly.
Don't suppose it had any effect on the candidates -they probably recognised my handwriting - but it made me feel good!


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## nigele2 (Dec 25, 2009)

If anyone is interested I investigated my own question via some financial/economy forums and thus:

Such a major abrupt change in the value of a currency is almost certainly due to Central Bank (ie. in this case "The Bank of England") entering the market directly and in grand style. From what I can fathom there are two likely reasons:

To pressure interest rates
To influence exchange rates

The latter might be because they feel the current value is artificial and does not represent the long term picture. In third world countries downward intervention maybe to keep the currency low and thus aid exporters .

While such unpredictable fluctuations might upset (or invigorate) any of us if it occurred just before or after we exchanged pounds for Euros there is I think an interesting thought for the Euro. Who decides central bank action for the Euro - the rich north (Germany/France) or the poor mediterranean countries 

It seems that had Greece had control of its currency it might have been able to use such tactics to negate the damaging action of speculators.

Note: the explanation above is based on helpful input from amateurs. Please consult with your own advisors before trading millions on the exchanges


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## jojo (Sep 20, 2007)

nigele2 said:


> If anyone is interested I investigated my own question via some financial/economy forums and thus:
> 
> Such a major abrupt change in the value of a currency is almost certainly due to Central Bank (ie. in this case "The Bank of England") entering the market directly and in grand style. From what I can fathom there are two likely reasons:
> 
> ...



There are always reasons, but unfortunately there are so many things that can change and not only the currency itself, but how it is valued against all the others... Us mere mortals just bob up and down on a turbulent sea with our fingers crossed

Jo xxx


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## mrypg9 (Apr 26, 2008)

nigele2 said:


> If anyone is interested I investigated my own question via some financial/economy forums and thus:
> 
> Such a major abrupt change in the value of a currency is almost certainly due to Central Bank (ie. in this case "The Bank of England") entering the market directly and in grand style. From what I can fathom there are two likely reasons:
> 
> ...


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## nigele2 (Dec 25, 2009)

mrypg9 said:


> nigele2 said:
> 
> 
> > Nigel....don't take this the wrong way
> ...


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## mrypg9 (Apr 26, 2008)

Nothing to do with 'PC' , (whatever that is) Nigel,it's about the current descriptive usage relevant to the real world situation.The 'second world' no longer exists ergo no 'third world'. Those countries that used to be so described are at varying states of economic development anyway. It is often said that the future lies with the 'BRICS' - Brazil, Russia, India, China - at the beginning of the 1980s, no-one would have considered either of these countries anything but 'third world', even the Soviet Union. Someone whose name I can't recall once described the USSR as 'the Upper Volta with rockets'. I visited the Soviet Union a couple of times in the mid-1980s and that was indeed an accurate description. A pitiful place.
Countries such as Poland, the GDR, Czechoslovakia as it then was, were truly advanced compared to the USSR. 'Second world' was a fair description then. But now Poland is the only European economy to have expanded in the last year.
France is more likely to be 'nice' to Greece than Germany is. The Greeks have memories of the Occupation and the theft of their gold and then Guido Westerwelle told the Greeks that they should get up earlier and postpone their retirement age. Merkel did not approve of such undiplomatic language from her junior coalition partner.
The bottom line is that being 'nice' is entirely contingent on perceived national interest and France and Germany will suffer greatly if Greece defaults, as will the eurozone as a whole.
The BOE is pledged to hold down inflation and is not aiming to strengthen the £, alas. Which Government has over the past two decades at least? Remember the lesson of entering the EMS at too high a rate?
And are you sure that the BOE took any action on Wednesday? Was it just a market reaction?
We too have a personal interest in money movements as we have considerable UK investments from which we derive our sterling income. I have friends who manage their own investments but we don't have the time or depth of knowledge to do this so pay fund managers whose knowledge is -hopefully -adequate to the task.
But economics is not a science, there are no 'laws' so there can be no prediction.
Just trends and contingent events. But if you ever find a way to buck the market......please let me know AT ONCE!!!!


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## nigele2 (Dec 25, 2009)

Pity mrypg9 that you are in the south and I in the north. I'd love a chat over a glass or two. I'd be very interested in your visits the other side of the curtain. Myself I visited Bulgaria and Yugoslavia. Both interesting but would have liked to see the old eastern block.

I take your point about "3rd world" but it is still a term in common use and I think it expresses best what I think of even accepting there may not be a second world. Guess if it wasn't all so complex it wouldn't be so interesting.

According to those I consulted only the BOE could have created the abrupt change. Also it was across currencies so I guess it involved buying pounds across the board. If you observe it on economic graphs you will see that it was no ordinary movement. Perhaps as you suggest the general strategy is a low pound but that they considered anything below 1.10 simply too low. The pound does seem comfy between 1.10 and 1.15 at the moment.

As for strategy the major help to me is dealing in cash and changing for example on Wednesday at the very favourable rate of 1.10. It does make me nevous to carry so much cash but it also avoids bizarre activities of spanish banks. 

well now for the rugby. Enjoy your afternoon and if ever your passing Asturias do let me know


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## mrypg9 (Apr 26, 2008)

Found this, extract from an interesting speech given late last year in a Westminster Hall debate on the economy by Christopher Chope M.P.

'The Government have given the impression that they have no exchange rate responsibility, but paragraphs 7 and 8 of the May 1997 letter from the Chancellor to the Governor of the Bank of England emphasised:

"The Government will be responsible for determining the exchange rate regime",

and that they can instruct the Bank to intervene in foreign exchange markets.

Interventions have been rare. The last one, which involved support of the euro, took place in September 2000, but one might also include the bizarre and ill-judged decision by the Chancellor to sell 60 per cent. of our gold reserves at the bottom of the market. The price was less than one third of what those same gold reserves would be worth now—again, a major error of judgment for which we have never had an apology from the Prime Minister.

In a fascinating exchange in the Treasury Committee on 10 December, the current Chancellor was asked whether he would be prepared to support sterling, if necessary. His answer was:

"No, the Bank of England's policy is to target inflation, not to target the currency."

The Chancellor was not willing to accept responsibility for his part in this, which is to deal with exchange rates.* He said that the Bank of England will not deal with exchange rates. Of course it will not, because that would be outside the remit given to it by the Chancellor in 1997*.'


The Exchange Committee of the BOE does buy and sell sterling in the normal commercial way as a consequence of the need to realise other currencies to pay off government liabilities. This would not be enough in itself to influence the value of sterling. All currency values -like house prices -are to a great extent artificial as there is no'true' value of the £, $, euro etc. Not since the Gold Standard - and did that reflect 'true' value? Nothing has a 'true' value, all valuations are artificial as they depend on what the market ( individual buyers ) are prepared to pay. I once bought a house for £5000, sold it years later for £110000, having turned down offers of £100000 and £95000. Which was its 'true' value? 
Economics is truly fascinating, like all human activities subject to seemingly wild and inexplicable swings. I think that too many economists don't look back at economic history. If Gordon Brown had done so, he would never have boasted of putting a stop to the boom and bust cycle. Whilst it's true that he presided over the longest period of boom since the Industrial Revolution, the economy has experienced cycles of stop/go for over five hundred years and Gordon Brown doesn't have the magic spell to break the pattern - if such a spell exists.
More importantly: Morrisons in Gibraltar have a selection of Badger Ales....


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