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Pound’s Euro rate improves

With the economy having improved over the last couple of months, and many people last year choosing to have a cheaper holiday and stay in the UK, perhaps this year there’ll be more of us thinking of treating ourselves to a trip to Europe this summer. And if you’re one of them, good news – over the last few weeks the Euro exchange rate has improved significantly!

Although €1.20 to the pound is not what you might consider a great rate, it’s not been at that level since the pound plummetted at the end of 2008. Unfortunately, it’s not all good news – this improvement is not due to the pound getting stronger but the Euro getting weaker – the pound continues to fall against the Yen and the Dollar (although it has seen a recent rally on this last count). The BBC’s Gavin Hewitt has written a great blog post explaining why the Euro is in such trouble.

When will the pound return to its previous strong position? Well, the rates we remember of a few years ago such as 2 dollars to the pound are not going to return anytime soon, but if confidence in the UK economy increases then investors will value the pound more. An increase in UK interest rates would also give a boost (since saving pounds then becomes more worthwhile) – but this would impact on mortgage interest rates for a lot of homeowners. Would you rather find it easier to pay your mortgage every month, or have a bit extra holiday money in the summer?

Tags: dollar, economics, Economy, euro, Foreign Currency, foreign exchange rates, holiday, holiday money, pound, united states, us, yen

The cost of Japanese goods

While we often look at foreign currency exchange rates with our minds on our holidays and how much the food will cost us abroad (see my previous post), they affect us in other ways when we are still at home.

A strong pound can affect British businesses, impacting their export sales as their products cost more abroad and therefore fewer people buy them. The opposite, of course, is true – a strong pound makes importing foreign goods cheaper, and a weak pound makes it more expensive. With so many consumer electronics made abroad, this affects us at home.

I’ve been watching the price of camera equipment, much of which is made in Japan. A year ago, there were more than 200 Yen to the pound, which meant that buyers over here could get a good deal on lenses and the like. However, compare this graph of the cost of a Canon lens with this graph of the pound vs. the Yen. As the pound dropped as low as 122 Yen, vendors in the UK have had to increase their prices almost £100 (on that lens – more expensive products have gone up more).

As the pound gathers strength, it is climbing back up against the Yen and the cost of consumer electronics will come back down. With the country still in a recession, retailers will be competing for sales and should therefore lower their prices as soon as the rates get more favourable – passing the savings on to us! I hope so, at least – I really want that lens.

Tags: consumer electronics, electronics, Foreign Currency, foreign exchange rates, pound, yen