We make our Climbing Frames with timber from the Ardennes in Belgium. Of course we pay in Euros, so the exchange rate is critical to the profitability of our Climbing Frame business.
When we first started it was 2007 and we paid at an average of 1.49 Euros to £1. By 2010 it was 1.08 to £1. It recovered as we recovered and the Coalition made the city think they had things under control.
For this year we budgeted Eur1.20 to £1, but for most of the year it has been stuck at 1.15. That is despite the Greeks, then the Portuguese then the Irish then the Greeks again, then the Italians, then the Greeks again, all making the City boys think that the Euro was in imminent danger. And today we hear that the Slovenian Government will fall, so we have new member of the ‘Troubled’ Group.
So, if the Euro is in such trouble, and it is only days until the French banks need to be recapitalised, and weeks until the inevitable collapse of the Euro, then why is it so stong?
Why is the Euro not back towards Eur1.4 to £1?
If it went down vs the Dollar and the Pound would it not help the Southern European states? Or would it hurt the Germans too much. To be honest, I do not fully understand what is sustaining the strength of the Euro, except perhaps that the Bank of England likes the weak pound, and more QE helps to keep it low.
A lower pound helps exports so could boost the economy. But it also boost inflation, and is not that also a big danger to us?
You know what? I am glad I am not in the Government or the BofE. Do they really understand what is happening, or what will happen next? I don’t think so, It seems to me that it’s a matter of hope for the best.
Also, having known now for some months that the economy was taking a new backward step, I think the government knows too at last. Listen carefully to Clegg and Cable. They are using lightly coded language but you being softened up for Q3 GDP going backwards. When they say that things are tough, and unexpectedly more difficult, they really do know now. I predict that Q3 will be -0.4%.
interesting comments….
i think the Euro is set to fall.
The establishment are betting hard that it will and even if it wasn’t going too before because of their undermining in the back rooms – it has no chance to succeed. where that will leave the £ is anyone’s guess. Also we depend on exports yet they are so small compared to imports we would be better off just making everything outside the uk seem expensive. Reducing imports seems to be the only chance we have for deficit reduction. IMHO