Belfast Telegraph

Thursday 28 August 2014

Weaker pound 'signals strength for economy'

The pound in your pocket is getting metaphorically lighter. In a strange twist of fate the value of sterling and the success of Northern Ireland companies is being both helped and hindered by the German economy, one which is has shaken off the last vestiges of recession and is now bristling along in fifth gear.

The impressive growth for Angela Merkle's economy has seen investors jump into the euro with both feet while bailing out of sterling as if it has sprung a leak.

And many think it has.

The pound has been described as the next currency to suffer a large-scale sell-off with a moribund UK economy keeping traders pressing the sell button. But of course the economic cycle wouldn't be complete without a swinging currency and this latest one will be welcomed with open arms by many exporters out there who had been struggling to compete in the midst of a relatively strong home currency.

That's particularly true for here where currency is key when it comes to doing business with our biggest trading partner in the Republic, where 40% of our exports head each year.

For pure exporters the sterling weakness is obviously a bonus although for those companies which are also importing, any gains could well be negated. But overall the move should be good for our economy and the currency moves of the last few days look to be playing into the hands of not just exporters here but also the central bank.

Only last weekend one of the Bank of England's external policy committee members Martin Weale said that a weaker pound would be just the thing to help the UK economy grow.

"The final, and perhaps most natural, means of resolving the problem is for the nominal exchange rate to fall," he told an economics summit.

That view comes as no surprise given the bank's armoury is pretty much empty with interest rates near rock bottom and quantative easing showing only marginal benefits.

A weaker currency might be the only hope.

So the pound's slide will be welcomed at Threadneedle Street but time will tell whether it provides enough of a boost to kickstart the economy. And if any economy needs it it's ours.

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