The pound sterling has taken a pounding this week for reasons which are not entirely understood by the economics fraternity. The ‘Flash fall’ could be anything from a computer glitch to a very smart house making a killing on the exchange markets.
However the context of the vulnerability of sterling many believe is an artificial crisis and others believe that sterling is now properly valued at around $1.20.
What is a bigger issue is what is happening to comparative currencies especially the Euro which seems to be escaping the attention it deserves. Whichever way the Brexit works out, hard or soft, there will be no relief for the Euro’s inherent weakness of the PIGS situation.
The Italian Premier can prattle on about no help for Britain, and Hollande witters on about doing no favours, they should look long and hard into a mirror.
If for example the UK should strengthen its ties with the Commonwealth Markets and drink more Australian and New Zealand wines, then Italy and France would certainly feel the pinch. If the UK should reciprocate import tax increases from Europe then those Europeans would or might have to cut base prices to remain competitive and maintain market share in the world’s fifth biggest economy.
The UK’s contribution to military defence in NATO and counterterrorism intelligence is by far and away the most effective in Europe and is vital to European safety.
British Universities and Research institutions will not suddenly be excluded from research discourse though funding is an issue but not one that cannot be resolved with good will. The UK will still have a constructive contribution to make to science and environmental affairs.
So why is everyone including the chancellor being so jittery? The idea of a ‘hard’ Brexit simply means that UK must do what is best for itself as an independent and thrusting power. The UK will remain a leader in many spheres and will continue to be a player in all the key theatres such as NATO and The UN.
A strong UK economy can still contribute hugely to sustaining the EU and minimise the disaster that is almost bound to accrue in the Euro zone.
If the worst happens in the US presidential elections the pound may well be a great opportunity for the wise long term investor.