Matthew Lynn Matthew Lynn

Sorry Remoaners. The British peso is on its way back

We were about to see parity with the dollar. It was fetching less than an euro at the airport. Spiralling costs were about to wipe out what little remained of our manufacturing industry, and the RXS’s – that’s the racist, xenophobic scum, in case you were wondering – were all about to lose their jobs.

A collapse in the value of the pound over the summer and the autumn was one of the few genuinely worrying economic consequences of our vote to leave the EU – and the Remain camp used it endlessly to demonstrate that the economy was in freefall. It wasn’t quite a full-blown sterling crisis, of the sort that used to crash the British economy. But with every hedge fund in the world shorting what the wags on the trading desks started to call the British peso for fun, it came very close.

But hold on. In the last couple of weeks, something very interesting has happened, even if few people have yet noticed. Sterling is back. It has recovered to $1.27 from a low of $1.18 to the dollar and it is back up to 1.19 against the euro, from a low of 1.09 back in October. Of course that may be a blip. Currency rates are notoriously volatile. But the pound is certainly no longer in freefall. And in fact, there are three reasons why it may be set for a sustained recover.

Such as? Well, firstly, the post-Brexit economy is surprising everyone on the upside. Even the most swivelled-eyed Ukipper probably didn’t think we’d come through this well. Retail sales are surging, house prices are fine, and employment is going up. As a fudged ‘grey Brexit’ emerges, that may well continue. After all, most companies seem to be shrugging off the vote to leave.

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Matthew Lynn
Written by
Matthew Lynn
Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’

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