RouteMaster: We use Real Effective Exchange Rates as the basis for fundamental analysis because they cause changes in the Balance of Payments. We have made our own calculations so as to give our subscribers a longer past record over the full range of currencies in our database, and do so on a consistent basis.

Incidentally we hope you have already spotted that everything except the new explanatory variable is the same as in the last chart. This is part of our strategy to make complex analysis easily visualised by letting you see the same information in the same place as each new chart overlays the last one.

This chart shows the rate as being towards the lower end of its range over the last two decades, so any risk seems to be limited. Contrast that with the big fall between 1979 and 1984 after the real rate had risen dramatically.

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