Friday, August 22, 2003

The Euro is falling against the dollar. While there has been renewed optimism in America about consumer spending, France in particular has slumped, this putting downward pressure on the Euro. The adjustment in the currency's value should help stimulate the French (and more generally the Eurozone) economy, but what effect will this have on the UK?

The strength of the Euro in the recent past has rendered British exports reasonably competitive and has buffered the UK economy from the worst effects of the downturn. With the Euro now adjusting downwards, Britain's strength is less apparent. A soft landing still appears to be the most likely outcome, but we are not out of the woods yet.