2 Sep 2017

Who is in the room containing those who are supposedly negotiating the terms of Britain’s exit from the EU? We seem to have sent a team of men (mostly) who are used to attending meetings without trousers which is perhaps appropriate.  The Europeans are fielding another team of men (mostly) who are seemingly permanently “flabbergasted” and like to talk about the conditions for talks about talks. Were they to remove their trousers you can be sure that they would be wearing a second pair underneath. But what is that large white quadruped that keeps sticking its proboscis where it’s not wanted? It is the elephant in the room and its name is sadly not Donald the Tusk but Erich the Euro. Here is a picture of Erich, trumpeting towards his glorious target of parity with the pound (the chart runs from 2014 to this week – click to enlarge).   No one knows for sure why currencies move against other currencies. To listen to analysts and other commentators you might imagine that it is quite obvious, in retrospect if not in advance. This is largely tosh. The best answer is the one that I heard every day when I worked on the floor of the London stock exchange: “More buyers than sellers, mate”. THE REASON FOR CURRENCY MOVEMENTS IS UNCLEAR AND UNIMPORTANT Looking at the elephant picture it appears that there have been more buyers of euros than sellers. In 2015 there were more sellers than buyers. Remind me, why was that again? There just were! Okay, okay. I suppose that Brexit uncertainty and a slowing top-end property market (yes, they might be the same thing) have caused foreign investors to buy less sterling this year. You might just about persuade me that others have been buying euros in preparation for opening new offices in Budapest, Valletta and Clermont Ferrand. But currency movements have real effects, though they take time to play out. There has been a 40% increase in UK tourists to Greece this year (doubtless fuelled partly by aversion to Turkey – people prefer oppressed governments to oppressive ones, it seems). As I write, these tourists will be asking themselves why Greece...