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Sterling rise is big Irish exports boost

Wednesday, August 06 14:48:14

Sterling continues to make strong gains against the euro and rose some 5pc this year so far, which is good news for Irish exporters.

The British pound has appreciated against the Euro by 8pc over the last 12 months. As the Irish recovery has been export led, this is good news as this makes exports to one of our main trading partners look more attractive to them. Export growth is a cornerstone of the recovery strategy for the Irish economy and the pound's strength makes Irish goods and services more competitive.

The reasons behind a stronger pound are simple, according to Garret Grogan, Head of Long Term Interest Rate Trading, Bank of Ireland Global Markets.

"The UK economy has recovered faster than its peers and it is looking like they will be the first major central bank to raise official interest rates with some market participants looking for a move as early as this year. UK unemployment hit a high of 8.4pc at the end of 2011, and now stands at 6.5pc which is a significant recovery of the labour market. The IMF is expecting UK growth of 3pc this year versus 1.2pc in the Euro area, a key differentiator."

"Since the inception of the euro in 1999 the pound versus the euro has been as strong as 0.58p per euro in 2000 and as weak as 0.98p per Euro in 2009, so even now at 0.79p the pound is significantly weaker than the average which is below 0.74p.Ireland's exports outside the Eurozone account for almost 60pc of GDP so a weakening euro is of significant benefit. The US Dollar has also recently started showing some signs of life as the macroeconomic picture in the US continues to improve. The US is our biggest export market accounting for 21pc so a stronger US$ would be a major boost for that sector," said Mr Grogan.

The US economy, similar to the UK is also improving with the unemployment rate having fallen to 6.2pc from a high of 10pc in October 2009. Generally the IMF is expecting growth in the US to be almost double that of Europe. The relative sluggishness of the Euro area to the UK and US may well see a further weakening of the Euro versus the pound and the dollar, he predicted.

For more visit: www.businessworld.ie