Six months ago I’d get about 1.25-130 Euros for my Pound Sterling. Today, 1.10. That’s a 20% drop.
Same goes for US dollars.
You can see it on these charts:
So it’s becoming clear. Currency traders - as a proxy for the world at large - consider Brexit to be a damning influence on the UK’s economy.
What next? This is the risk: Marmite. We’ve seen it, hohoho, as supermarkets argue with their suppliers about who will carry the can for the foreign exchange driven increase in prices. Should the supplier reduce their prices in Pounds Sterling, or should the supermarket increase prices to the consumer?
We all know who gets stiffed in the end here. The consumer.
So then inflation is going to go up - fast. But here’s a subtle distinction of the modern world: Even if a product is made in the UK and sold in the UK - if it is owned by a company that reports their earnings in a foreign currency, well hey - they are obliged to push the prices up to keep pace. So no let-up there.
What happens when inflation rises? All together now - interest rates go up! Even though every economist can recognise the disassociation that means increased interests rates have no impact on the price of foreign goods in the short to medium term (and frankly, probably, in the long term too) - even though, they will be increased as the politicians freak out and look for familiar blankets to comfort themselves with and save the party.
Interest rates up … housing price crash as people dump their properties, accumulated over the last many years of ultra-low mortgage costs.
That crashes whatever wealth people have built up, and is a disaster.
Again. For Britain. Buggger.