Sterling may still have a headache in the coming months, look out for spikes in the market and make sure you take advantage of them!!!!

This report will take a look at the cost of sending money overseas, if you are buying foreign property you may be surprised at just how much can be saved by using Foreign Currency Direct. 

“Brighter times are on the horizon for Sterling, but you need a damn strong telescope to see them.”

The table below shows the difference you would have been able to purchase trading at the high compared to the low yesterday and the difference this would have meant on a £250,000 transfer.

 
Currency Pair % Change Difference on £200,000
GBPEUR 0.62% €752.50
GBPUSD 0.76% $3,100
GBPCHF 1.04% CHF 3,470
     

 

The UK Economy and Sterling Forecast

Sterling suffered against almost all majors yesterday despite the lack of any obvious driver in terms of data sets or breaking news – BUT WHY?

To me it seems alarmingly obvious. Whilst the headlines in business sections of newspapers continue to highlight the potentially catastrophic situation of the Euro or the growing debt in the States, canny investors are more focused on the unenviable position the UK economy find themselves in.

GDP remains on the balance between growing and shrinking, inflation is wildly out of control (easily more than double the BofE’s 2% target) and interest rates remain at record lows – with very little sign of increasing any time soon. On top of this we have just suffered the worst civil unrest since the 1980s for very little reason whatsoever. If this isn’t enough to upset your appetite to invest in Sterling then consider then that we are the third most exposed entity to Eurozone debt and a major trading partner to the US.

Another interesting fact to note is that the Misery Index (the combined measure of inflation and unemployment) is the highest in the UK since Cher topped the charts with the ‘Shoop Shoop’ song in 1991. Worrying times indeed.

Sterling / Euro Forecast

To put it blankly the future for Sterling looks extremely bleak, the question you ask yourself is when it is likely to change? Well in my opinion it isn’t, certainly not very soon. If you are holding off on selling Sterling in the short or medium term then you are looking towards other currencies weakness and not Sterling strength. I doubt we will see interest rates rise for over a year, GDP has shown very little signs of significant improvement in Q3 and as we aren’t raising interest rates inflation is likely to continue to stray. Very basically this means the Pound’s position is likely to get even more fragile and I’m sure each and every member of the MPC are suffering from an increasingly receding hairline as of late.

UK Data (like MPC members’ hairlines again) seems exceptionally thin this week. The only notable figures are Consumer Confidence (released as expected at -31) and Nationwide House Prices due out Thursday morning. Unsurprisingly these are expected to decline MoM to 0.1% from 0.2%.

Although there is arguably more pressure on the Euro than Sterling from Sovereign Debt, this is more long term than the predicament than the UK economy is in. It may be a bold statement but I could see GBP/EUR rates head towards parity as we approach Christmas this year before what could be a better year for the Pound in 2012.

There are few currencies at the moment that I would think are likely to lose ground against Sterling for the remainder of the year. Brighter days are on the horizon, but you need a damn strong telescope to see them. If are looking at buying overseas property from Sterling then give one of our dedicated team a call today to make sure your move does not burst the Bank 00 44 1494 787462

Dollar and the Safe havens

Speculators have been mooting that due to the extent of risk aversion seen on the markets this year (leading to record highs for Gold and the Swiss Franc) that they are no longer ‘safe’ assets, as should the global economic position improve they are vulnerable to a sharp sell-off.

“It is not difficult to believe that gold could correct a reasonable amount.” Ashok Shah stated, chief economist investment officer at London & Capital. I certainly understand this point, but to me this is a long way off –  gold and the Swiss Franc are, in my opinion still likely to break into fresh highs and although they are likely to correct at one stage this is unlikely to be for some time yet.

A lot of this comes down to the American economy, which like the UK is showing very little sign of striding towards a full recovery. I think the Dollar (alongside the Pound) will struggle for the rest of the year (even against the Euro) and that as a result Gold and the Swiss Franc will continue to gain. As a further nail in the coffin for the Dollar today Consumer Confidence in the States slumped to 44.5 yesterday evening. If you are unsure how the global economy is likely to affect your transfer or whether your currency of interest is considered ‘risky’ or ‘safe’ get in touch today on our international number  (+44) 0 1494 787 462 during U.K office hours asking form Daniel Wright

Australian Dollar Forecast

Unlike the UK things are looking very rosy in Australia. The economy over there is in better shape, Interest rates are 4.25% higher and data due out this week looks likely to improve as opposed to worsen, even the weather is better over there!

Retail Sales and Private Capital Expenditure are both expected to show an improvement MoM tomorrow and Private Sector Credit grew this month (released this morning at 0.2%). You wouldn’t need a pair of crystal balls to hazard a guess that Sterling’s temporary resurgence against the AUD may have subsided as the AUD continues to gain back ground at an alarming pace. We are still five cents away from record lows earlier this month, something I could foresee being broken again in September. If you are moving down under or have any Australian Dollar requirement you can utilize a Stop order to make sure your transfer does not become unaffordable. For a full explanation email me [email protected] and one of our currency specialists will be in touch.