UK to dump the Sterling for Euro?

[Killer-B]

Saw a blurb on one of the finance channels last night saying that the UK was considering dumping the pound in favor of the Euro -

This kinda caught me off guard a bit, as I've always thought the pound preformed great against other currencies - and wonder why they're contemplating this move? (obviously, given the global melt-down, I'm certain this is spurring them on a bit) - but still question this move - for I believe the Euro has fallen far more in value than the pound....

That said, *IF* this rumor is true - and goes through... Can anyone think of a long-term play? I suspect that will bolster the Euro as it would tend to show that the UK has confidence in it -

Thoughts anyone?

[1ka]

I haven't heard anything new about this. There was always an idea that the UK being part of European Union would eventually lead to us taking on the Euro.

There's an old, but mainly valid article here -> http://www.psr.keele.ac.uk/docs/efaq.htm#abolish

Whatever happens, it's at least 5 years off.

[Killer-B]

Was on CNBC last night - probably just regurgitating old rumors -

Either way - just checked BBC's site to see if I could find anything... Nothing really - Except to counter my own claim before, the pound has fallen in value more than the Euro... However, some are saying the Euro could drop to .85 against the USD Hence me thinking ahead - as to a long term play -

Snippet from BBC:

http://news.bbc.co.uk/2/hi/business/7727399.stm


Falling fast
It is unusual for a currency to fall so far, so fast. Only twice in recent history has sterling fallen by such a degree. On 16 September 1992, the pound was withdrawn from the European Exchange Rate Mechanism, triggering a fall from around $2 to $1.40.

Sterling fell by a similar degree in 1980 as commodity bubble burst.

Mr Maher says that the pound at $2 was significantly overvalued and puts the currency 's long-term intrinsic value at around $1.60.

"It's been like an elastic band that had been stretched too far and when it gave, it was vicious," he says.
Mr Derrick at Bank of New York Mellon says it is feasible that the pound could hit $1.40 in the near future and one euro could be worth more than 85 pence.

[Killer-B]

This is from Morningstar - Seems the EU Chief DID make a comment about the Brits dumping the pound - but was quickly dashed -

Story: http://news.morningstar.com/newsnet/...00434_univ.xml

2nd UPDATE: UK Says No Change On Euro After EU Chief's Claim12-1-08 12:00 PM EST

(Adds U.K. opposition quotes, Barroso spokesman reaction.)

LONDON (AFP) -- The U.K. denied Monday that plans were afoot to adopt the euro currency after the European Commission president said it was considering joining but the country's euro-skeptic critics jumped on the claim.
Citing private conversations with U.K. politicians, Jose Manuel Barroso said Sunday that London was thinking of ditching the pound as a consequence of the global financial turmoil which has seen sterling plunge in value.
However, Prime Minister Gordon Brown's spokesman insisted: "Our position has not changed. We have no plans to change our position.
"We see benefits of euro membership but the five economic tests have to be met," he said, referring to tests on economic convergence and other matters set by Brown when he was chancellor of the exchequer under Tony Blair.
Any decision on whether to join the euro "will be based on whether it is in Britain's economic interest," said the spokesman.
Once a highly-charged issue, the euro debate has fallen off the domestic agenda in recent years and now rarely surfaces. Although Blair was warm to the idea, Brown is seen as being firmly against joining and there is little sign public opposition has waned.
Barroso said U.K. entry to the euro was "closer than ever before" amid the global economic slowdown, which has seen sterling slump to its lowest level against the euro since the European single currency was created in 1999.
"I'm not going to break the confidentiality of certain conversations but some British politicians have already told me: 'If we had the euro, we would have been better off'," he RTL-LUCI radio in France. "I don't mean this will happen tomorrow, I know that the majority (of Britons) are still opposed, but there is a period of consideration underway and the people who matter in Britain are currently thinking about it."
In Brussels Monday, Barroso's spokesman refused to be drawn on which U.K. politicians the European Union commission chief was referring to, reading Barroso's radio question-and-answer out word for word.
Before the euro was launched, the U.K. government - specifically Brown as chancellor - set five economic tests to decide whether to recommend joining the currency . These were economic convergence between the U.K. and the eurozone; the need for the eurozone to be flexible to economic change; as well as its impact on jobs, foreign investment and the financial services industry.
The tests however were widely seen as being vague and Brown's way of blocking Blair's pro-euro ambitions.
William Hague, foreign affairs spokesman for the main opposition Conservatives, said: "Keeping the pound is vital for Britain's economic future.
"We need interest rates that are right for Britain, not the rest of Europe. There are no circumstances in which the next Conservative government will propose joining the euro.
"If Labour ministers still want to get Britain into the euro they should come out and say so. We will be putting questions to the government to find out what conversations have been going on."
The United Kingdom Independence Party, which wants the U.K. to pull out of the E.U., slammed Barroso.
"That ruling elite would love to bounce us into the euro and will grasp at any straw to do so," said UKIP leader Nigel Farage. "If Senor Barroso would actually like to consult the 'people who matter in Britain' then he can call for a referendum on both the euro and the Lisbon Treaty so that the people of Britain can tell him where to go."
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[1ka]

Timely:

http://www.dailysquib.co.uk/?c=117&a=1588