Misery for tourists as 'flash crash' means that the pound is now worth less than the euro at airports as sterling reaches a 31-year low

This article talks about the depreciation of the British Pound Sterling, reaching levels lower than the Euro, along with holidaymakers being offered as low as 0.97 Euros. There was a point in July 2015, where 1 pound converted to 1.44 Euros, making it financially worthy for British residents, holding the pound, to vacation in different parts of Europe that uses the Euro. But the British pound sterling endured an overnight 'flash crash' triggered by a suspected 'rogue algorithm' sending it plummeting to a 31-year low against the US dollar.

The British pound has partially fallen because it has imported more than it has exported, and to fill in the trade deficit requires foreign investors to put money into the UK. International worries over Brexit result in slow investments, along with a slow anticipated future resulting in the depreciation of the British pound. Interest rates i.e. The Bank of England’s decision to cut interest rates, along with the US federal reserve gradually raising interest rates has put upward pressure on the value of the dollar, and pushes the British Pound Sterling down.

The depreciation of the pound would cause full year earnings to decrease from 300 million to 285 million pounds. Output could only muster a slight rebound to 0.2% in August, while industrial production posted a worse –than-expected fall of 0.4% over the period.

Foreign companies listed in London have their shares increased due to the depreciation of the pound, since it boosts their earnings when they are translated back into the British Pound. Therefore, amidst the disadvantage posted to those British citizens travelling abroad for a vacation, foreign companies or people living abroad and entering Great Britain have a great advantage since they can get more of the British Pound when transferring their local currency. Since it becomes cheaper to buy goods and services locally in Britain, this would only benefit foreign countries due to their stronger currency, and ability to buy more of the British pound when converting it from your local currency.

The fall of the British pound also implies to trade in goods and services. As the value of the British Pound falls, imports become more expensive for British locals, therefore, inflation should increase, while exports become valuable for foreign buyers. As prices rise, exports > imports, thereby reducing the trade deficit.

Thereby, the depreciation does pose a misery to tourists in foreign countries, that possess the British Pound due to its lower value, but it does eventually reduce the trade deficit, moving it into a surplus into the distant future.

Link: http://www.dailymail.co.uk/news/article-3827050/Bank-England-probes-flash-crash-pound-plunges-6-against-US-dollar.html

Another reference: http://www.telegraph.co.uk/business/2016/10/06/sterling-falls-to-record-low-against-top-trading-partners/