Forum Moderators: martinibuster
I've done a little hunting around for exchange rate forecasts and the outlook is not good. If anything the value of our earnings is set to fall even further - $1,000 will be worth £515 by October.
However, it isn't quite as bad as it seems. From June onwards, if the forecasts are right and the dollar stays, approximately, at this level, the change in exchange rate will only directly affect earnings in the US, as UK Adwords are in pounds. UK advertisers will presumably pay more 'dollars' per click for the same number of pounds. These then get converted back using a similar rate. So income from the UK, and other non-US countries that keep parity with sterling, will remain roughly the same (I presume other countries advertise in local currency).
However, when the exchange rate returns to a more favourable number, it should work the other way round, in our favour.
The bottom line is that there will be a big drop in earnings this month (~4%). Thereafter, future months should see a smaller drop in sterling earnings. When the dollar recovers, we should get a nice bonus.
Anyway, if it wasn't for your post, I wouldn't have even noticed that the value of the dollar has dropped even more. Is inflation to be considered the culprit?
I can remember years ago someone told me the dollar is only worth 1/3 of it's value. Such as, if you buy something in the US for a dollar, it's only worth 33 cents.
So the new blender I just bought for 30 dollars, is really only worth 10 dollars.
Sorry I don't really study exchange rates, (unless I'm traveling) and it's interesting to know how non-us publishers are affected.
Curency traders don't seem to have a clue which way the markets are going and depending to whom one talks each currency is about to "collapse"!
We seem to have these currency crises about every 10 years, all I see it as is a massive poker game played by people with a load more money than I have since IF balance of payments had anything whatsoever to do with it then the US would have been wiped off the map years ago...but amongst those who know that really has nothing to do with it at all since the Eurozone is going down the same road.
It's all financial power politics etc in case you were wondering with the biggest launderers being....
So what does the regular AdSense publisher do?
Not a lot of choice really if you need the money to live with, keep taking it at the exchange rate Google offers and hope you get more traffic and earnings to compensate for the loss of earnings.
Personally I am leaving mine in US Dollars for the moment and using a Dollar debit card on my travels however if it starts to nudge up to the US 2.00 = STG 1.00 then I may have to reconsider using my Euro or Sterling debit cards.
For example UK advertisers spends advertising pounds. The amount stays the same but now translates into more dollars. So if he spends £10 that should translate into more dollars per click.
If the dollars goes down because each pound buys more dollars.
The advertiser pays the same in sterling so is unafected. Those who have their ads on their site get a little bonus.
So are we realy any worse off? We should in theory be getting more dollars per month to compensate for the weaker exchange rate.
I'm glad to see a thread on this again. It seems there was another thread posted by a Canadian expressing the same concerns with the exchange rate, but for some reason that thread has disappeared.
Actually, it was me who started the dollar crash thread and i'm english.
It was moved by a helpful ever friendly mod, who decided that economic issues have nothing to do with adsense and that we have no right to discuss them in this forum.
It was then deleted from the forum it was moved into (ecommerce) by an equally competent and efficient mod with no word of advice or warning.
It would appear that with the sinking dollar the US market is going to be hit with inflation as offshore vendors start upping their prices. I know I've been holding the line on prices, but I can't see this going on much longer and am looking at other markets.
US monetary policy has never been good. Intrest rates are predicted to rise and this will stall econmic growth. Lots of European companies are losing a great deal of money by trading in dollars (I've just finished working for one of them). However as long as oil is pegged to the dollar and not the euro, we don't have much of a choice.
The only way around this is to buy US holdings and bank in dollars. Which is all well and dandy if you fancy going to the banana republic of America to spend your money. ;o)
I won't be suprised if the exchange rate gets even higher it's pretty close to the $2.00 USD - £1.00 GBP already.
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"The UK economic data has been generally firm over the last few weeks with evidence of stronger activity in the services and manufacturing sectors while house prices have also risen, although gains have been concentrated in the London area."
"The consumer inflation rate moved back up to the 2.0% Bank of England target in April and the central bank is concerned over the risk of rising inflation, especially with energy prices still at a high level. The economy is liable to be brittle, however, especially with recent Sterling gains likely to undermine the manufacturing sector and confidence is liable to stumble.
Investment inflows are liable to be weaker, especially if the UK stock market continues to weaken. Markets have factored in two UK interest rate increases by the end of 2006, but these expectations are liable to be revised down. The underlying trade account will also be a negative Sterling factor over the next few months.
Weak US confidence will tend to support Sterling against the dollar in the short term, but the fundamental UK weaknesses will still be a concern while US interest rates will remain above UK rates over the next few months. Overall, Sterling will offer poor value above the 1.90 level against the US currency."
[edited by: retro at 10:21 am (utc) on May 23, 2006]
I was working on the dealing floor at the same financial institution when it was both USD1/GBP and USD2/GBP (not at the same time %-P).
While it was at one end I did a roaring trade importing second-hand machines from the US to the UK, including Demon's first dedicated DNS server!
Rgds
Damon
Investing in the US market is highly speculative at the moment. You could just as easily get burned.
Did you notice that Dell has just ditched Intel and is now planning to ship it's PC's and servers with AMD processors.
Intel's dual core processors whilst cheaper are technically inferior to AMD's.
