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Thursday 18 June 2009

Sterlings climb improves the Spanish and Canary lslands Real Estate markets

Sterlings value affects the real estate markets in the Canary Islands and Spain, with a particular increase in the Fuerteventura property market has seen a significant increase in business from the UK that has increased in line with the improvements and gains that sterling has made recently.

Sterling on Wednesday morning saw a decline against the major currencies on Tuesday had nothing to do with the unemployment data and nothing to do with the monetary policy committee minutes: Neither came out until an hour and a half after it had set off south. Almost on the dot of eight cable began a slide that cost it two and a half cents in the following five hours. Sterling/euro cut just over a cent in slightly less time and sterling/Swiss performed proportionally badly. The move was provoked by a softer tone to equity markets, with all that implies for risk appetite. After a rally lasting more than a week investors knew a profit-taking signal when they saw one and they lobbed out their surplus pounds.

As far as the unemployment numbers went, they were acceptably bad. Jobless claims rose by less than expected as did the unemployment rate, which rose to 7.2%. The MPC minutes showed unanimous approval for a continuation of the asset purchase programme.

The US inflation data painted an interesting picture. Prices went up by just 0.1% in May and prices excluding food and energy did exactly the same. That symmetry was entirely absent from the annual figure. In the 12 month to May headline CPI fell by 1.3%. "Core" prices, excluding food and energy (commodities, in other words), were up by 1.8%. What happened last summer? Commodity prices fell out of bed, led by oil. Although prices did not bottom until December they are already back up to October's levels. In four months' time that commodity price deflation will have worked its way through the system and headline inflation will be heading back into line with core inflation. Put that together with the possibility of growth in the second half of the year and you see why investors are already speculating that we will see higher US interest rates by Christmas.

But that is all in the future. For the time being, those central banks that still have scope to do so are still lowering their policy interest rates. There have been rate cuts in Iceland, Brazil and Turkey this month and it is possible that South Africa might join them next week. Today's meeting of the Swiss National Bank is highly unlikely to result in a change to its 0-0.75% target range but be prepared for other developments. Back in March the SNB threatened to intervene if its currency became too strong. They did it too. Three months on they may decide that it is time for a reminder.

Report provided by moneycorp

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