Charles's Thoughts: Sterling had a mixed week, holding its own against the €, gaining against the US$ and losing ground against the commodity backed currencies. Mid week the Bank of England released its quarterly inflation report which showed that inflation was unlikely to reach the target rate of 2% for a number of years. The report did show that the BoE was expecting an improved growth in the UK economy over the coming years than previously forecast. The overall reaction of the market was sterling negative especially when the Governor of the BoE decided to comment. He highlighted that the major concern remained the spare capacity that exits in industry and the labour markets. But by the end of the week sterling had managed to reclaim lost ground against the € and the US$ No significant economic data released in the US and the US$ seemed to track the equity markets and therefore risk appetite/aversion. At one stage the US$ hit a 15 month low against a basket of currencies. The US weekly jobless claims showed that the US economy was slowly moving forward as last weeks growth figures had shown but the Fed continues to shout from the hilltops that it is a slow road to recovery.
This week we had the release of growth figures for the euro zone. Overall there was growth which was the first quarters growth after 5 quarters of decline. Germany, France and Italy showed growth whereas Spain continues to decline. And I would bet we see the same trend in the quarter we are in as we all know how Spain became very dependent on the building industry which has ground to a halt. The European Central Bank still views the strong euro as a worry and as such will be keeping interest rates low for a while.
With increased risk appetite the commodity back currencies had a good week. Australian unemployment figures released this week surprised on the positive side which supported the Australian $ and the belief that we will see further increases in Australian interest rates in the New Year.
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.
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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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