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    Over the last few months, the pound has indeed taken large hits, and went from £1 : €1.30 - £1 : €1.07.

    Is the $ to blame?

    The reason the pound is so low against the euro is because Sterling is far more closely aligned to the US dollar than it is to the euro. This country deals far more with the USA in every way than it does with Europe. (Fact, not opinion!)
    As the USA is undoubtedly heading for a recession, the US' currency is weak. And therefore Sterling has followed suit. Its weakness is 'thanks' to the US dollar's weakness.
    Will the £ continue to decline?

    What do you think?
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    Remember that eurozone interest rates are higher (ECB - 1%) than Bank of England rate (0.5%, 50 Basis pts).

    Also, some good industrial data came out of Germany recently (1.8% increase in goods orders in the quarter I think) and since this is the largest economy in the eurozone (3rd largest in the world as well) this will have an effect on the Euro.

    Also, 67% of UK trade is with Europe so I'm curious why Sterling is mentioned as 'far more closely aligned with the dollar'. Both the UK and US' economies may be underperforming relative to the major Eurozone nations (Fra and Ger).
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    The pound; within the coming years, will become weaker.
    Soon €1 will be greater than £1. However, that will not last long.
    As soon as the economy picks up, and public finances are resolved, the pound will strengthen again very quickly. The pound has always been a strong currency and a good currency to purchase reserves.
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    (Original post by EnthusiasticEnthusiast)
    Over the last few months, the pound has indeed taken large hits, and went from £1 : €1.30 - £1 : €1.07.

    Is the $ to blame?
    The reason the pound is so low against the euro is because Sterling is far more closely aligned to the US dollar than it is to the euro. This country deals far more with the USA in every way than it does with Europe. (Fact, not opinion!)
    As the USA is undoubtedly heading for a recession, the US' currency is weak. And therefore Sterling has followed suit. Its weakness is 'thanks' to the US dollar's weakness.
    I read something along these lines during summer 08...and time has certainly borne it out.

    Economists have been frequently saying that we would be in a much stronger position to withstand the recession had we adopted the euro when others did.

    What we need to ask ourselves is; would our position improve quicker if we dumped the £ in favour of the euro?
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    No.

    If we adopted the Euro we would be in hot water.
    We would have no control over interest rates!
    They are crucial to controlling inflation.
 
 
 
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