Charles's Thoughts: Sterling’s poor week on the foreign exchange markets was influenced more by the previous week’s comments by the Bank of England (BoE), and their intention to expand quantitive easing, than any given news or events over the last 5 days. A very marginal improvement in UK GDP figures on Friday did nothing to support sterling having already lost roughly 4% against the euro and the US$ in the past 4 weeks. Given that the BoE are not due to meet again until the 10th of September and very little significant UK data due out next week, sterling may well find itself in this lower trading range until there is a new development or perhaps a change of strategy from the BoE. However, amongst all this gloom the expectation for the UK to return to growth during quarter 3 of 200 9 is positive and brave and unpopular decisions are often needed at times of crisis. In Mervin we trust? A marginal improvement in US consumer confidence and estimated GDP figures brightened the outlook for the US economy this week but did little to strengthen the US$ due to the risk-appetite effect present over the last year. Most recent US data now points towards economic growth in the coming quarter and though spending and confidence seem to be on the up the improvements will be very gradual and unemployment will remain a big challenge.
Confidence within the Eurozone is definitely on the up for having seen France and Germany leave recession by reports released in recent days. Specific information this week regarding German inflation which was slightly better than expected helped the euro to extend the previous week’s gains against sterling and close the week up against the US$ also. However, as with the UK and the US, inflation is expected to remain under the target of 2% and so any chance of seeing a hike in interest rates from the European Central Bank seems very unlikely before the end of the year.
The high-yield and/or commodity backed currencies remain as the strongest currencies on the market at present. Still propped up by the Chinese demand for commodities and the greater return sought by investors who are leaving the safe-haven positions with little to no interest on offer. The upshot of all this being that sterling currently sits at multi-year lows against the New Zealand and Australian dollars.
Why is Currency Management So Important? Using a bank could cost you £3-4,000 per £100,000 transferred. Buying at the “wrong” time could cost you many £’000’s more as rates can move as much as 3% in a very short period of time. Then add in transfer costs that the banks charge for sending and receiving funds and you could be looking at additional costs of £10,000 per £100,000 transferred. By developing a currency strategy and by working with a specialist currency broker these losses could be minimised if not eliminated.
Smart Client Testimonial: "Thank you for making our transactions go so smoothly. As promised, our account was opened within hours. Your traders were pleasant and efficient, and each transaction was very much at the exchange rate I expected...ie not a million miles away from the inter-bank rates and certainly much better than my high street bank could quote. All in all, an easy experience and we will have absolutely no hesitation in recommending your services to any of our friends buying property abroad.” Ian Pritchard If you haven't opened a Smart account yet, call me on freephone 0808 163 0102 (+44 0207 898 0541) or fill out our online Account Form at: http://www.SmartCurrencyExchange.com/application.htm
How much will a Property Cost? To estimate the cost of a property simply DIVIDE the price of the property by the appropriate rate noted above. But note this is based on the inter bank rate so the actual cost will be slightly more.
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