Winners and losers pound dollar euro exchange rate movements
The tale of two central banks has seen monetary policy diverge this year, taking their respective currencies with it.
- Exporters:
When a country's currency strengthens, the effect that generally receives the most immediate attention is that on exports and profits.A strong sterling will also have an impact on companies', who have a strong internaitonal footprint, when their profits when they're translated back into pounds.
However, despite adverse currency movements, there are a number of factors which will help companies.
- Tourism industry:
What's more it's bad news for euro-earners visiting our shores
- Airliners:
Europeans will find that their own carriers' flights are cheaper compared with British Airways or Virgin.
However, across the Atlantic, Americans will find that British carriers actually offer better value for money.
– Take into account falling oil prices, cheaper fuel etc. & dollar impact of this.
- The treasury: – current account balance:
"Sterling's appreciation could could affect overall demand through several channels: lower reported profits (which translate into lower equity valuations and dividends, thereby affecting spending), lower exports, and lower domestic production in import-competing sectors."
"Another effect could be lower reported income on prior investments in foreign bonds, equities, and other forms of investment – whether made by individuals, pension funds, or companies."
"Any reduction in thi sinvestment income – even if it just resulted from currency translations and not real changes in income – would reduce the current account balance."
http://www.bankofengland.co.uk/publications/Documents/speeches/2014/speech760.pdf
- Holidaymakers:
– Tourism figures – Euro vs. United States.
- Consumers:
Shop prices will see some downward pressure as retailers find they came buy more goods with their money.
While it'll take a while filter through to the high street people will eventually start to see even lower prices.
Another force driving this is inflation, which is being dragged lower by oil prices, taking it to a record low.– How much do we import from Europe?
– How much do we import from the US?… if you're buying anything linked to or directly from Europe then this will get cheaper.
… if you're buying anything linked to or directly from the United States then this will get more expensive.
- Drivers:
A global supply glut and the waning appetites of once ravenous emerging economies like China and India means Brent oil prices have
However, as the pound continues to depreciate against the dollar, it'll put a ceiling onto some of these gains. This is because oil is priced in dollars, and when the exchange rate rises, this actually pushes up oil prices.