First and foremost, exchange rates matter - to everyone - no exception! They affect the value of everything you own, the cost of everything you need and want, the outlook for your business (both domestic and those trading internationally), and whether foreigners might choose to invest here. They are always relative and so might be a symptom of one currency's weakness or another one's strength; you have to tease these out yourself. So learn to look across the spectrum and rank the strongest moving down to the weakest. Remember too that foreign exchange is the value of money while interest rates are the cost of money.
On the Bank of England's trade-weighted basis, it fell 12 per cent since 23 June, matching the lows of 2009, 2010, 2011 and 2013; only in 2008 was it ever weaker. The drop was sharp, but not as steep or relentless as in 2007-08. In other words, a loss of purchasing power that hurts, but not unprecedented. Against the US dollar the fall was of the same magnitude, with losses versus emerging markets and commodity currencies also clustering around the 12 per cent mark. Interestingly, against Europeans and the euro between 8 and 10 per cent was sliced off. The big stand out: an 18 per cent slump versus the Japanese yen.
GBP/JPY
This is Nissan's big problem, rather than potential trade tariffs to be introduced by the EU. Cumulative FX losses over the last year amount to 34 per cent; Sunderland has to shift an awful lot more cars to cover the rate at which profits are repatriated. Major long-term support for sterling against the yen lies between 120 and 126 yen; the all-time low 116.80 in 2011. The weekly chart has a potential tweezers pattern and the monthly a potential hammer, both hinting that an important low is possibly in place already.
Against the euro we have retraced 61.8 per cent of the rally since the Lehman-induced record at €1.0200. Charts are inconclusive although €1.1600 has held so far this week. Only a break above €1.2300 would suggest an interim low is in place.
GBP/EUR
Swiss franc strength, which the Swiss National Bank has been battling for years, sees sterling well over two standard deviations below the mean of the last four years at CHF 1.4700. Dramatic record lows were seen between 1.1300 and 1.1500 in 2011 and again in 2015; hopefully, we will avoid a similar fate this summer.
GBP/CHF
Finally, against the Swedish krona, a particularly skittish pair, the pound buys 11.3435 of them. Interestingly, we may have based this month at 10.9500, which lies just under the central band that has dominated much of the time for the last 35 years. In other words, neither hot nor cold, but just right. This despite the Riksbank having almost the lowest key target interest rate (minus 0.5 per cent), proving that interest rate differentials don't necessarily matter.
GBP/SEK
