Charles's Thoughts: Sterling held its own this week. The week revolved around the meetings of the various central banks. In the UK the Bank of England kept interest rates on hold which was as expected. But the BoE did increase their programme of quantitative easing by £25bn to £200bn. From past experience this should have led to sterling weakening across the board. But two factors seemed to benefit sterling. The first one was the increase was less than some had forecast which the market took as a positive. The second factor was the BoE emphasised that the funds would be made available at a slower rate than those previously. This again was viewed as a positive. So has sterling turned the corner? That may be wishful thinking but at least the last two weeks have on balance been positi ve which is a start. The meeting of the Federal Reserve highlighted for the 100th time that interest rates will be kept at the current low levels for quite a while. But at the same time they detailed the factors which necessitated such a course of action; spare production capacity, low inflation/deflation and low inflation expectations. All fairly obvious but good to see detailed. Unemployment figures released on Friday show that US unemployment has doubled since December 2007 and is now over 10%. I think this highlights why US interest rates are going to be hold for quite a while.
The European Central Bank kept the euro interest rates on hold which was expected. There sentiments were very similar to the other central banks in that it was going to be a long road to recovery. The ECB also stated that they would keep there emergency liquidity provisions going but were very conscious that they had to be curtailed on a timely basis once the recovery was gathering pace. The strength of the euro is still causing problems for exports and this is something the ECB is particularly worried about as they see it as potentially hoking any recovery before it really gets going.
The commodity back currencies had a mixed week. The Australian $ continues to benefit from increasing interest rates although the rate of increase is likely to be slow and steady rather than rapid. The New Zealand dollar fell back on fears that recovery was not going as well as hoped.
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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