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.
Next, the euro is set for a very, very turbulent year. The crisis in Italy is just starting, and elections in France and the Netherlands follow soon afterwards. In all of them, anti-EU and anti-euro parties will make impressive gains. Even if they don’t win power, they will come close. Say what you like about sterling, but we have a pretty certain idea what currency we will be using in 2020, or indeed 2120. That isn’t true in much of the euro-zone.
Finally, the dollar may soon be under pressure as well. It has been surging for the last year, which explains much of sterling’s weakness. But while Donald Trump has impressed the markets so far with his pro-business rhetoric, and his Wall Street savvy economic team, his fiscal recklessness may soon take a toll.
As 2017 starts to unfold, Britain will increasingly look like a politically stable, medium-sized economy, with decent growth – and that combination will make it one of the more attractive currencies in the world.
Of course, there is no ‘right’ or ‘wrong’ price for sterling. There is just the price the market happens to set. The devaluation after Brexit will help fix the terrible trade deficit, and it would probably have been better for it to have stayed low for a bit longer. But the global sell-off of sterling looks to have ended. And the one ‘bad’ thing that Remainers could point to as a consequence of Brexit has come to an end. If they weren’t quite so smug and hysterical, you might almost feel sorry for them.