GBP Currency Strengthening and it's effect

It is of interest to see the pound strengthening, in particular against the Euro.
With the Euro now at 1.26 to the GBP, cheaper imports will start to have an effect on keeping a lid on prices, whether goods supplied to industry or to the consumer. Many business people are already thinking of not having the “price increase”, in xx months’ time, this thought may become “need to reduce our prices to stay competitive”.
Plenty of available labour that is “the whole of Europe” will continue to keep UK wage inflation to the minimum.
Therefore low interest rates could continue for some years to come, with “deflation” becoming more of a concern (as in Europe).

Any more thoughts?

Comments

  • Had the same thought from a different angle. While house price inflation is a concern for the BOE, I guess they will also want to maintain the competitiveness of our exporters: i.e. they don't want to see the pound strengthen too much. But raising interest rates will tend to strengthen the pound. Therefore, they may want to hang on longer before raising them.
  • 3rd July - Sweden prevents deflation by reducing interest rates by 0.5%
    Is deflation spreading? Will countries central bankers keep rates low, to avoid "deflation" entering their system through an "over-valued" currency!
    More "deflationary" News expected.
  • Cheaper holidays, yippee! :) The £/dollar rate is not doing the GSK share price too many favours. (& the same for many other companies that earn a significant amount of their profits from North America.)
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