Back to www.cobrasmarketview.com |
Brexit. Scotland did not want to go there. And they might still not have to go there. It seemed evident to me from the get go that Brexit was an emotional issue for those in favour of it, and that it will continue to be devastating for the U.K. Just imo.Brexit and Boris Johnson Send the British Pound on a Slide -- New York Times
“The markets see turbulence for the economy,” said Kjersti Haugland, chief economist at DNB Markets, an investment bank in Oslo. “They see the potential for the economy to contract abruptly.”
The decline in the pound is at once a reflection of the market’s recognition that Britain has been economically weakened by Brexit, and a cause for distress.
The drop effectively raises prices for a vast range of British imports, from fruit and vegetables shipped in from Spain to chemicals and industrial parts made in Germany. It increases the costs of international travel, just as Britons flock to the beaches of the Mediterranean for summer holidays.
I agree with all those points.In theory, the weaker pound should bolster British exports by making them relatively cheaper than those produced by competitors in Europe, North America and Asia.
But given that Britain imports more than it exports, the net effect is negative. Whatever advantages exporters might gain would almost surely be canceled out by barriers to trade across the English Channel if Britain really leaves Europe without a deal.
Most broadly, the decline in the pound signals that investors see less need for British currency in the future, because Brexit is already reducing the appeal of doing business in Britain.