Sterling sell off abated as Pound Strengthens against Euro

Sterling Sell off abated as Pound Strengthens against Euro

Sterling vs. Euro;

This week’s report will focus on the erratic swings in GBP/EUR rates, the news and data that caused the fluctuations, and potential moves in the coming weeks.  The story dominating FX headlines recently has been sterling’s rapid decline.  The pound has been subject to an aggressive sell-off as fears mounted that the UK may enter a triple-dip recession, which could result in the loss of our Triple-A credit rating; and the now looming prospect of an in/out referendum on Europe for 2015, has created greater uncertainty.  Last week, however, we saw the first significant retracement of this pressure and, once again, ECB President Mario Draghi was at the centre of the move.

The single currency began last week on the back foot as news broke of corruption and scandal in the Southern European States.  Spain and Italy were both back in the headlines with surprising allegations of undeclared payments from a secret slush fund being received by Spain’s ruling conservative party. 

This news was coupled with the announcement that Banca Monte dei Paschi di Siena, the World’s oldest surviving bank, was involved in a derivatives scandal . 

So why has this affected euro rates?  Essentially this calls on the old cliché “Markets hate uncertainty”. 

Though this caused a rise in GBP/EUR rates the largest swing in prices can be credited to the words of Mark Carney and Mario Draghi.  The incoming Governor of the Bank of England sat before the Treasury select committee on Thursday, and in his testimony to MP’s, he outlined his thoughts and intentions for the UK economy moving forward.  Mervyn King has suggested before that Quantitative easing has a diminishing rate of return, with regard to effectiveness, though Carney outlined that the BoE could expand the range of assets it purchases, whilst supporting the pound from further weakening, all without effecting the UK’s inflation target.  Sterling began strengthening both before and during Mr Carney’s words.

Mario Draghi once again serenaded the currency markets with his announcement last Thursday; speaking on the euros current bull-run.  He discussed the significance of the rate, with regard to growth and price stability, highlighting the dangers of a continual strengthening.  His comments on inflation hinted that a cut to interest rates may not be entirely off the table; the last time such a measure was taken, we saw GBP/EUR rates surge to four year highs.  His words came as a surprise to many, most expected him to touch upon the euros recent appreciation, though the announcement appeared more of a concerted effort to talk the single currency down.

Much of the recent coverage of GBP/EUR rates appears to show the UK, seemingly, in perpetual decline and the euro storming the markets.  Yet the most recent NIESR GDP estimate for the UK came in at 0.0%; better than expected, however, sterling/euro is at a pivotal point.  The UK certainly is not out of the woods, despite the recent flurry of positive data, the last official GDP figures have been below forecast.  If this were to happen again the false hope could be doubly damaging for the pound.  Not only this, but the euros recent appreciation has largely been built on rhetoric rather than any concrete data.  Although Greece’s Finance Minister has suggested that they could begin the road to recovery by the end of the year, this remains to be seen, and if there was a cut to interest rates to stimulate the European economies, or more negative press, we could see the euro weaken again. 

Sterling vs. US Dollar;

It was another choppy week for cable and the swings we saw in exchange rates last week could well continue. Since the start 2013 sterling has been in free fall against the US Dollar, and the current trend shows no signs of improvement.

Positive UK retail sales data released on Tuesday did see a brief spike in rates; figures showed that sales increased for January by 1.9% compared to January 2012 which is the largest year on year rise since December 2011. The news saw the GBP/USD cross jump to a high of $1.5792 but sterling could not hold its value over the course of the day and rates quickly started to fall. By midweek the pound actually fell by 1% against the dollar to reach a low of $1.5634.

Over in the states talk of spending cuts and tax increases have resurfaced. The temporary fiscal cliff avoidance package put together by President Obama on New Year’s day is due to expire on the 1st March, leading the President  to approach congress to put another short term package together to avoid larger cuts next month. The proposal was quickly rejected and the longer it drags on the more likely we are to see the dollar come under pressure. Indeed last week’s poor US Q4 GDP figure was largely put down to fiscal cliff  pressures and if a permanent solution cannot be put in place, there is chance rates could start to push higher.

Thursday was a potentially positive day for the UK last week with the Bank of England holding their monthly meeting. However the expected hold on interest rates and no further QE only gave the pound a brief boost. Even when combined with the zero growth (but no decline) estimate of Januarys’ GDP the pound could not buck the general trend of decline against the Dollar. The UK economy seems to be the centre of attention and in the absence of growth the pound simply cannot keep pace with the Dollar at the moment.

With so much volatility surrounding the currency markets the use of Stop Loss and Limit Orders has increased in popularity; they can protect you against a falling market but also help target a rate that might not be currently available. For more information you can read our finance pages here or contact us at info@goldacreestates.com : http://goldacreestates.com/Finance 

 

Eurozone Gaining Confidence

Eurozone Gaining Confidence as Spanish Banks Ease Dependancy

Is there confusion again over Spain's banks? If so its not really new.   On one hand, the Bank of Spain said in mid-January that non-performing loans were on the increase and that more than one in nine would probably not be repaid.  On the other, the central bank said at the same time that Spanish banks were less dependent on emergency funding from the European Central Bank.  In December they borrowed €357bn, appreciably less than the €411bn they took last August. Prime Minister Mariano Rajoy is relaxed.  He is "absolutely convinced that Spanish financial institutions will not require any more funds than they were given already" because they have been subject to a "complete striptease" laying bare their financial circumstances.

The prime minister's optimism is shared, though perhaps with more caution, by investors. Since the beginning of the year they have been buying bank shares, lifting the value of Bankinter by a third and Banco Popular Espanol by a quarter. Investors are also much readier to hold Spanish bonds. Six months ago they were demanding a return of over 7% on their five-year loans to the government. Today they are content with less than 4%.

The change is symptomatic of a warmer attitude among investors towards the euro. A month ago it looked as if 2013 would turn out to be a better year for the single currency and halfway through January that is proving to be true.

Since the turn of the year the euro has strengthened by about five and a half  cents against the pound and by about four  cents against the US dollar. It has done so mostly as a result of improved sentiment.  Strange to think it was about twelve months ago when  most of the world were questioning the very survival of the single currency  with a full complement of member states. Today it feels reasonable to expect that singleness to continue, as a result of the determination of EU leaders and central bankers to do "whatever it takes" to save the euro.

Okay  so what else is happening?  

Interestingly instead, it is the pound that must face the tough questions. Even though the UK economy appears to be in better shape than Euroland, investors are not satisfied. They fear a third dip into recession. They fear the downgrade of Britain's AAA credit rating that might follow that dip. They fear the anti-Europe rhetoric in Westminster and the media. And because of those fears their appetite for sterling has faded.  Add to this the fear of further job losses in the Financial Services sector and the high street disappearing unemployment may still have  a further negative impact upon the  UK's timetable for recovery

So half the euro's performance against sterling this year is down to improved demand for the single currency; the other half is the result of investors' disenchantment with the pound. Both attitudes could change. It would be unusual if there were not some new panic in Euroland before too many months have gone by. The UK economy might pick up speed once the cold weather has passed and people are allowed to go back to work and school.

Stateside the new holiday destination of " The Fiscal Cliff" seems to have disappeared and the republicans have provided Mr Obama a little bit longer to sort out the economy and the debt ceiling which is standing around $17trillion.  Not sure how many zeros a in a trillion but its a lot. What the bet it could hit £20 trillion.  In fairness however housing, manufacturing and employment opportunities are all moving in the right way for the citizens of the USA.

The big decision if you are transferring money is timing so if you want to make more of your money and take expert guidance talk to our preferred  currency specialists. If you want to guard against rate fluctuations and get the best deal for your Sterling contact us and read our financial pages here: http://goldacreestates.com/Finance .

New Tax News for Canary Islands & Spain

The latest conditions for cash payments above 2,500 euros were announced on the19th November 2012 for Companies, Individuals and Professionals in Canary Islands, Spain.

The provision which is included in the new anti-fraud law published in the Official newspapers on the 30th October specifies that the amount is the limit payable in cash, taking effect 20 days after publication in the BOE.

For the development of this measure the legislative experience of EU countries such as France and Italy were taken into consideration. The limit is applicable to individuals, companies and professionals but does not apply to payments made to banks. There is also a provision for individual non-residents limiting the amount to 15,000 euros so as not to damage linked tourism activities.

The participants in the operation should keep documentary evidence of payment for five years from the date of payment, to prove that it was made through one of the means of payment other than cash. They will be required to provide these documents at the request of the tax authority.

Those who violate this restriction will face fines of 25% of the value of the payment made in cash. Both the payer and the payee jointly and severally liable for such infringement, so that the tax may be brought against any of them to collect 100% of the penalty.

PENALTY EXEMPTION IF REPORTED

The taxpayer who was involved in one of these transactions will be exempted from punishment if they voluntarily reported the incident to the administration provided that three months have elapsed since the payment in cash. The Tax Office has set up a procedure for handling complaints telematics from tomorrow, referring exclusively to cash payments in excess of €2.500.

The Act also expressly provides a rule against splitting operations, the calculation of the limit of €2.500 legally established. In addition, the standard introduces reporting requirements for any authority or officer in the performance of his duties, becomes aware of any breach of the legal limit.

The Tax Office has clarified that if an operation exceeds cash paid €2.500 but you pay in several times splitting the payment of amounts below the legal limit, is also breaking the limitation is effective now. That is, if an operation of €4.000 is payable in cash in two installments of €2.000 each, the penalty would be 25% above €4.000 and thus €1.000 in total.

 

HIGH DENOMINATION NOTES

The use of bulk cash is directly related to transactions to evade taxes. Limiting cash reinforces the control that keeps the tax in the fight against fraud. This line includes the special plan on the use of high denomination notes (€200 and €500), started four years ago and which is continued by the Administration.

For more information on Property Finance please read our finance pages here: http://goldacreestates.com/Finance 

Sterling vs Euro Latest Update on Currency Exchange

Sterling vs. Euro Currency Rates can be an important consideration for buyers of property in Fuerteventura and Spain as well as those looking to repatriate after having sold their properties with Goldacre Estates. Here is the latest weekly update on what the rates are doing:

Last week saw an interesting week on Sterling/Euro with Rallies in both directions, creating decent opportunities for both buying and selling the single currency. The early part of the week saw the pound in general decline, with Mario Draghi’s Euro positive rhetoric ringing in many traders’ ears. It was then his counterpart Mervyn Kings turn to move the markets later in the week.

At Wednesdays Bank of Englands quarterly inflation report, King poured cold water on the widespread rumours that a UK base rate cut was imminent. His read on the situation is that a cut would further hamper financial institutions’ ability to lend and would in fact be counterproductive to economic growth in the UK.

With the already low interest rates unlikely to be cut investors rallied to the Pound, safer in the knowledge that their yield would not be reduced and thus the exchange rate moved up.

It appears then that the UK with its expectation of zero growth and no apparent movement on rates or quantitative easing, is now unlikely to be the main driver on the GBP/EUR cross in the short term. The storm clouds that still hang over the Eurozone seem a much more likely cause of market movement.

Although this week has seen no real negative news from the single currency area; the effect has realistically seen a sideways drift rather than any real strength. The fact that King saying there will be no rate cut can move the market a whole cent in one afternoon session is testament to how weak the Euro is.

The weakening in UK economy will probably keep the rate in check and potentially prevent enormous rallies back to pre-2008 levels but in the here and now, a near 4 year high should still be seen as attractive if you need to purchase this year; fixing a forward rate in the mid 1.20’s would suit most budgets when compared with last year when rates were as low as 1.13. 

Weekly Economic Data that may affect exchange rates

Monday – It’s a relatively quiet start to the week. The only UK data of note is the latest House Prices from the Royal Institute of Chartered Surveyors showing the health of this sector. In the Eurozone there are some minor Wholesale Prices. Elsewhere there are some Retail Sales numbers from New Zealand.

Tuesday – Lots of data today compared to yesterday. In the UK we have: Inflation Numbers (CPI and PPI), Retail Prices, House Prices, and the BoE Inflation letter by Mervyn King. In the Eurozone we have: French Inflation data, French GDP, German GDP, Spanish Inflation Data, Portuguese GDP, EU wide GDP, Industrial Production and surveys on Economic Sentiment. So much that could affect GBP/EUR rates. Stateside we have the latest inflation numbers, Retail Sales, and a measure of Economic optimism.

Wednesday – Again a very busy day, but this time all from the UK and US. Starting in the UK we have the all important Bank of England minutes. This is followed by a speech by BoE governor Mervyn King. In addition we will see various jobless measures including the Claimant Count & Unemployment Rate. Over in the states we have another round of inflation numbers, Mortgage Applications, Industrial Production and numbers on the Housing Market.

Thursday – Today we will see the latest UK Retail Sales, which are an overall barometer of economic activity. In the Eurozone there are some inflation numbers which could dictate interest rates. Stateside we have Building permits, Jobless Claims, and the Philadelphia Manufacturing Survey. We end the day with more inflation numbers from New Zealand.

Friday – There are no UK releases today. In Europe we see the most recent Trade Balance numbers and some German inflation data. We will also see the latest Canadian Inflation numbers. Over in the states we have the latest measure of consumer sentiment.

If you are looking to make an exchange contact Goldacre Estates Sl http://goldacreestates.com or call 0034-928535044 for more information about how we can help save you money when buying and selling propery abroad.

Sterling Rise For Euro Property

STRONGER THAN EXPECTED GDP HELPS STERLING AGAINST EURO
Britain's economy grew by 0.8% in Q3, postponing or even cancelling the need for more QE. Euro buyers run out of enthusiasm.
Sterling went up by three cents over the seven days. It was almost a one-way street with two thirds of the gains coming at a rush on Tuesday.

The week began with investors in a mood almost of sympathy towards sterling. On Monday they allowed the British Bankers Association to announce the lowest number of approvals in 18 months and the slowest growth in ten years and for mortgage lending. The bears refused to bite. The following morning they even wanted to buy sterling as London opened. It appeared that they were second-guessing the figures for Britain's gross domestic product (GDP) in the third quarter of the year (Q3), speculating that GDP would have expanded more than the 0.4% predicted by analysts.

And they were correct to do so; GDP grew by a provisional 0.8% in Q3. The figure was at the very top end of expectations and even the most dyed-in-the-wool pessimists had to admit it was a good one. Sterling headed upwards against everything; it did it no harm that earlier in the day ratings agency Standard & Poor's had confirmed that Britain's AAA credit rating was no longer in doubt, it was "stable". Ratings don't come better than that.

For the rest of the week the GDP figure kept the bears at bay. It allowed sterling to avoid the potentially ill effects of a 0.7% fall in Nationwide's house price index, a fall in the CBI's retail sales index and a lacklustre Bank of England total for mortgage approvals in September. A small -0.1% fall in Hometrack's house price index late on Sunday night did no damage either, even though a spokesman said that " further price falls are inevitable".

The euro should have got off to a good start last Monday when Standard & Poor's said that "Germany is recovering brilliantly". S&P's take on the Euroland outlook was that Germany's situation will require the European Central Bank to raise euro interest rates even as Ireland and southern Europe remain stuck in recession. But just as investors were not inclined to punish the pound, nor were they ready to praise the euro. With the US dollar on the ropes and nowhere else to go they could not easily abandon the euro even if they wanted to. And they didn't particularly want to, it was more a matter of running out of enthusiasm for buying it.

There was no particularly bad economic news from Euroland and Spain but there was not much on the positive side either. Industrial orders were up by a a healthy 5.3% in August but consumer confidence in Germany was static. German inflation and unemployment were both steady at 1.3% and 7.5% respectively. Brussels' measures of economic confidence was higher, industrial confidence was lower and consumer confidence was steady. Euroland inflation inched up from 1.8% to 1.9% and German retail sales fell by a disappointing -2.3%.

For the pound the biggest deal this week will be Thursday's Monetary Policy Committee. The MPC is unlikely to make any change to interest rates but it the subject of quantitative easing will inevitably crop up. After last week's stronger than expected GDP figure most analysts expect the MPC to hold its fire on the matter of renewed quantitative easing. However, a "no" vote on Thursday does not guarantee it will not be proposed at future meetings. QE cannot be dismissed as yet. Buyers of the euro should continue to hedge half their requirement.

For more information on Exchange Rates or Euro Properties for sale visit http://www.goldacre-estates.com or contact info@goldacre-estates.com, 0034-928535044

Currency Exchange Brokers For Fuerteventura, Canary Islands & Spain

When buying or selling property in Fuerteventura, Canary Islands Spain, Currency Exchange is an important Part of the Process. Heres why from Moneycorp:

What is the difference between a high street bank and a foreign exchange broker?

When sending money to the Canary Islands most people use their high street bank. However, people are increasingly using foreign exchange specialists to make their international money transfers. So, what’s the difference?
Timing and guidance. Never underestimate the value of a good exchange rate.

Currency markets are constantly fluctuating and making your transaction at the right time can make a big difference to the amount of money you end up with.

For example, if you needed €20,000 in your Spanish bank account, transferring your pounds on the dates specified below would have cost you:

- 20 July 2010: £16985
- 20 Aug 2010: £16563

That’s a difference of £423 just one month!

A foreign exchange specialist will offer free information and guidance on the currency markets, helping you decide on the best time to buy. A forward contract is just one of the services a currency broker can provide. You book to buy or sell your currency in the future, at a rate you fix today. Forward contracts can help protect against adverse currency movements and can be used to lock into favourable exchange rates.

Staff at your high street bank have neither the expertise nor the breadth of market knowledge necessary to monitor the currency markets on your behalf. When sending money to Fuerteventura through your bank, you will have to accept the exchange rate on the day of transfer.

Plus, foreign exchange specialists offer more competitive exchange rates, as well as low transfer fees.

Below is another example of savings that you could have made by transferring pounds in bulk with Moneycorp rather than your high street bank.
Buying €20,000 with sterling:

Lloyds TSB
Natwest
MONEYCORP
Exchange rate
1.1463
1.1485
1.1724
Sterling cost
£17,447
£17,414
£17,059
Transfer fee
£35
£40
£15
Total
£17,482
£17,454
£17,074
Additional cost using a bank
£408
£380
-

Based on an exchange rate comparison on 19 May 2010 between Lloyds TSB, Natwest and Moneycorp.

Moneycorp charges a set transfer fee of £15 for a one-off transfer, irrespective of the amount. Transfer fees charged by the banks typically range from £20 to £40.
No matter the amount of your transfer or your needs savings can still be made in movement of money in any direction.

Using a currency specialist – The main benefits:
· Highly competitive exchange rates
· Easy account opening with no cost
· No commission charges
· Fast transfers, low fees
· Ability to fix exchange rates for a set time period, helping protect from adverse currency movements
· Expert guidance from your own dedicated Account Manager

Trust Moneycorp to take care of all your money transfers to and from Spain; however small or large. Their experts make the process quick, easy and highly cost-effective.

Contact Moneycorp in the Costa del Sol on +34 951 319 700 or, email costadelsol@moneycorp.com
Please mention Goldacre Estates when calling Moneycorp or contact them directly on +34 928535044, info@goldacre-estates.com

Currency Exchange Latest for Euro - Sterling In Canary Islands

Exchange Latest for Euro - Sterling In Canary Islands
Heres the latest from Halo International on what the exchange rates are doing for those clients looking to buy Euro based property in Fuerteventura.

OK hands up who believes Naomi Campbell? Who believes Mia Farrow? Who believes Naomi Campbell’s former agent, Carole White? Nobody! Neither do I. So if we don’t believe any of them, what is the truth behind these conflict diamonds and does it really have any bearing in the fact that Charles Taylor was a gangster and a despot? I think not.

Last night’s eagerly awaited US Federal Reserve interest rate announcement went according to the script; the Open Market Committee left their base rate at virtually zero percent and confirmed that it would be reinvesting funds that came back from its previous quantitative easing into Treasury bills to keep the cash in the financial markets. They are worried about the lack of robustness in the recovery; in Fed-speak that is said as, the recovery is “more modest” than anticipated; consequently, they are seeking to keep fiscal policy as loose as possible to stimulate as much growth as they can. They are right to be nervous judging by the data we received before their meeting yesterday; US inventories shrank, productivity slowed and small business sentiment declined. However, they decided that $2.045 trillion of financial support for the markets was enough to do the job. Let’s hope they are right. It would sort my finances out I think although it might leave a couple of the credit cards unpaid but I digress. The US Dollar was a tad stronger ahead of the announcement but it eased a bit afterwards.

That money flowing from the USD is finding its way into the Pound and Euro and the nervousness in the US plus the evident slowdown in China is causing a flow of funds away from the Australian and New Zealand Dollars which both weakened overnight.
In the UK, after yesterday’s slightly more positive news that the trade deficit narrowed, today we await the Bank of England’s quarterly inflation report. As you know, the BOE left its base interest rate on hold last week and we don’t get the minutes to that meeting until next week, so this is seen as a change to gauge the mood of the Monetary Policy Committee. We know that Andrew Sentence has started voting for interest rate hikes in order to stave off increasing inflation and the rest of the committee will be nervous of the effects of the VAT rise due in January and warnings of rising energy costs. We will see what they think about growth as well. Forecasts for UK growth have been downgraded by all manner of commentators and institutions, so the BOE’s take on that will be interesting to watch. Sterling, which has had a strong showing in the last 24 hours in spite of a third consecutive decline in consumer sentiment (according to the Nationwide index), looks set to have a busy morning with unemployment and average earnings data coming before the BOE report. We expect a small scale fall in the numbers out of work but a sharper decline in wage price inflation which oddly enough is probably a good thing when the BOE is battling inflation without robust growth.

By way of contrast to the Nationwide report, Australian consumer sentiment hit a 7 month high this month as the halt in interest rate hikes had a positive effect on the punters on the high streets. However, events in China are weighing on the Australian Dollar; that combined with a surprisingly bad profit report from the Commonwealth Bank and the nervousness in the US have caused investors to reassess their riskier trades. The carry trade which involves interest rate differentials and currency exposure is less attractive in this environment and that is causing some sales of NZ Dollars and Aussie Dollars with those funds finding their way back into the safer havens of the Pound, US Dollar and Japanese Yen.

So have a good day everyone. We are expecting it to be a corker for currency traders due to the vast array of data and news releases we are awaiting. You’ll find most traders are only really looking forward to the long cool beer at the end of the day. Or maybe that's just me.

Strong Sterling 20 Month Highs Against Euro

Need Euros to buy that Canarian Dream Home? Halo Financials latest on the Currency Markets: Sterling continued on its path of strength early yesterday but is still buffeting very substantial resistance levels in most currency pairs. The Pound’s new found strength is partly due to fairly universal approval of the new government’s aggressive action to reduce Britain’s indebtedness and partly down to the slightly hawkish view espoused by Bank of England committee member, Andrew Sentence when he offered a more detailed explanation of his decision to vote for an interest rate rise at their last monetary policy committee meeting.

The gist of Mr Sentence’s report is that he is concerned that with UK inflation remaining stubbornly above the bank’s target, with the global recession unwinding, with the Pound being oversold and with reasonable domestic growth within the UK, the case for small incremental interest rate hikes was a solid one. He may well be right but whether the rest of the MPC is bold enough to risk the fragile recovery in the pursuit of lower inflation is an entirely different matter. Nevertheless, Euro buyers are seeing the best levels in 19 months, US Dollar buyers are getting their best levels in over two months and the Sterling - NZ Dollar and Sterling - Aussie Dollar exchange rates are back at the top of their ranges. This morning’s release of mortgage and lending data from the Bank of England may directly impact on these levels.

For its part, the Euro remains in the spotlight as the Bank of International Settlements has warned that European banks and some on the other side of the Atlantic are still on life support and have a long way to go before they are stable again. Banks in Europe and the UK are under huge pressure to bolster their balance sheets to ensure they won’t have to call on taxpayers again but that pressure is making it hard for them to set aside enough cash for loans which are essential is the economies of these countries are to grow out of recession. It does seem that taxpayers are guaranteeing the survival of banks which could and perhaps should have failed but the banks are not guaranteeing anyone else’s survival.

The queen is in Canada just days after the visit by the G20 heads and several thousand members of their entourages. All of that ought to bring some overseas earnings into Canada but Canada does really need it. Canada is one of the real success stories of the last two years of economic turmoil but the Canadian Dollar is a tad weaker than it has been of late; a tad more affordable to those who need to buy it and the Sterling - Canadian Dollar exchange rate has only been higher than the current level once since 1st March.

The British and German delagates walked away from the G20 meeting with a fair amount of pleasure that their views had been largely applauded by the rest of the delegates. That is no mean feat but it leaves the Pound in a bit of a quandary against the Euro. The UK government is actively cutting its budget to get a handle on excessive debt levels but the German government has more constraints imposed by Brussels which make it hard for Angela Merkel to cut back much more than she already has. The positive view of the UK plans are being reflected in the Pound’s new found strength but we cannot get too carried away just yet. Sterling is at the strongest level against the Euro since November 2008 but it is banging its head on several technical levels which are capping the move for now. Failure to get above €1.2320 would leave the Pound vulnerable to another downward leg which could take us all the way to roughly €1.17 without disturbing the upward trend. However, if €1.2320 breaks, then a stuttering push towards €1.25 is on the cards. There are a lot of 'Ifs' here but it is that kind of a nervous market right now.

Get Your Sterling Highs For Euro Exchange and Canary Property

Sterling appreciates against the euro to levels last seen in December 2008 Sterling’s appreciation against the euro continued last week with a new 18-month high recorded at €1.2114, whilst a higher low was seen at €1.1715.

The main releases from the UK saw the publication of the Purchasing Managers Index (PMI) figures, which are leading indicators of economic health and seen as a good barometer of the sustainability of the current recovery in markets around the world. The UK’s Manufacturing PMI maintained a 15-year high reading of 58 (above 50 is expansionary, below is a sign of contraction in activity) despite a small fall being forecast. The construction sector also continued its recent resurgence with a reading of 58.5 (which was marginally above expectations), while the services number – the most important of the three – was slightly down on expectations, but still strong at 55.4. All of this lends further credibility to the UK recovery gathering pace.
Elsewhere, the pound also gained on news that UK house prices rose to the highest levels in more than two years. The Nationwide Building Society said the average cost of a home increased 0.5% in May to the highest level since July 2008. They maintain their view that the current supply and demand balance in the market is still consistent, with relatively stable to modestly increasing prices.

The other main news of the week was the collapse of the ambitious attempt by Prudential to buy AIG's Asian arm. This prompted the unwinding of currency hedges put in place in anticipation of a deal, when the initial bid was announced back in March. AIG’s outright rejection of a reduced offer from The Pru’ put an end to the deal once and for all, with the UK insurer confirming that the deal was off on Wednesday. Sterling rose broadly on Tuesday as anticipation grew that the deal was close to collapse. The currency was still benefitting when the deal was finally taken off the table.

The euro has continued to struggle, as risk aversion at one point waned, resulting in renewed buying of riskier assets, including sterling. The recent downgrade of Spanish sovereign debt by credit ratings agency Fitch left the euro on the back foot due to ongoing structural weaknesses, particularly in the southern Mediterranean area of the eurozone.

Despite assurances from China and Kuwait that the euro’s current troubles would not affect their purchases of the single currency, rumours surfaced that Iran planned to sell some of its euro holdings as a result of the volatility. A Chinese news agency report that the Iranian central bank would sell €45bn of its foreign exchange reserves to buy dollars and gold further dented investors’ desire to hold the single currency. This adjustment to their reserve holdings was expected to be conducted in three stages, with the first tranche already underway. It was also claimed that other Gulf states had started to cut their euro holdings.
Data flows have had limited impact on the single currency in recent weeks and the same was true this time around. German retail sales and employment figures were better than forecast, whereas the Europe-wide unemployment rate remained constant. European retail sales were down 1.2% against the forecast of a small rise and revised GDP was unchanged at 0.2%. As mentioned above, this had almost no effect on the euro, with investors preoccupied with more serious matters. However, the data is not supportive of a broad-based recovery in Europe, which will be of concern to those nations about to embark on significant spending cuts that will only hinder growth further.
A more specific indicator of future growth rates was the composite European version of the Purchasing Managers Index (PMI). This showed a fall to 56.4 from 57.3 in April – although this was still above an estimated 56.2. The service sector component rose to 56.2 from 55.6, whereas the manufacturing figure declined to 55.8 from 57.6. The outlook for the region’s economy has darkened in recent months, as the threat of contagion from Greece’s fiscal crisis raises investors’ concern about the future of the euro area. While the problem has pushed the euro lower this year, making exports more competitive, governments have had to respond with tougher austerity measures to cut budget deficits. This, in turn, has dampened consumer confidence. Further alarming news from the eurozone came from an eastern European member state. Last week saw Hungary’s new Prime Minister, Viktor Orban reveal that his nation’s finances were in a “very grave situation” and that his predecessor had falsified the true state of his country’s finances.
Whilst Hungary is not the biggest economic power in the world, this news will further undermine confidence in the eurozone due to the lengthening list of nations that may need to seek emergency funding from the European Central Bank (ECB) in the future. With worsening economic conditions gripping the southern Mediterranean countries, we are already seeing great levels for euro buyers to hedge all or part of their exposure. Whether for a one-off real estate purchase or ongoing living costs, they would be wise to fix a price for half the amount of currency they are going to need. Hedging does not guarantee buying euros at the best possible price; it guarantees not buying them at the worst.

Britons Can Save Millions on Euro Exchange in Spain

Britons missing out on £101M each year on international money transfers

Poor bank rates and high charges for foreign exchange transactions mean individuals need to be savvier when transferring money overseas. Research by Moneycorp reveals that Brits are potentially losing over £101m a year by not shopping around for the best deals when transferring money abroad. Furthermore, uncompetitive exchange rates and high bank charges are costing individuals a lot of money, despite a concerted effort by most to reduce their outgoings on luxury and even staple items.

David Kerns, Head of Personal Clients at Moneycorp, comments:

“While many individuals are visiting comparison websites more frequently, checking voucher code sites and consulting online consumer forums before purchasing goods in order to save money, this mindset doesn’t seem to have extended to foreign exchange. As a result, individuals are missing out on a very large sum of money they could be saving, by transferring funds overseas through a foreign exchange specialist rather than a bank. Not surprisingly, high street banks are cashing in as a result of this surprisingly apathetic approach.”

People buying or selling property overseas and people emigrating or repatriating will be particularly affected, though this issue will affect all Brits who are transferring money overseas.

People who own additional properties abroad and make regular mortgage and/or utilities payments will also be badly affected, as every transfer is open to individual transfer charges, in addition to exchange rates.

Data from the UK’s number one property website, Rightmove Overseas, reveals that the average house price in the Costa del Sol in Spain is currently €369,860.68. With a deposit of 10% (€36,986), using a high street bank rather than Moneycorp would cost an individual, on average, an extra £558 on their deposit alone.

An individual who wants to transfer a lump sum of £100,000 to an account in Europe would lose out on an average of €1,690 by using their bank for the transfer into euros.

David Kerns concludes: “Despite the UK coming out of recession recently, individuals shouldn’t be lining the pockets of their bank managers and it’s in their best interest to maximise their investments. Prior to making any overseas payments, we always advocate that people shop around to get the best rates possible.”

If you are looking for the best currency deal for buying or selling property in the Canary Islands ask Goldacre Estates on 0034-928 53 50 44 or contact them at info@goldacre-estates.com

Currency Matters for Euro Property Buyers in Canary Islands

Transfer talk
Get more for your money with Moneycorp's forward contract currency deal, writes Stephen Tiley

WHEN transferring money to Spain and Canary Islands it’s important that you get as many Euros for your pounds as possible.
Transferring your currency overseas – whether you’re putting down a deposit on a home or making regular mortgage transfers – is often left to the last minute, which can cost you thousands due to currency fluctuations.
Timing your transaction is key and you should never underestimate the value of a good exchange rate.
Currency markets are constantly fluctuating, so making your transaction at the right time can make a big difference to the amount of money you end up with.
The amount of money lost or gained over the last five month for example is incredible.
For example, buying a Spanish home in Fuerteventura or Gran Canaria for 150,000 euros on January 28 would have meant transferring £129,310.
Leaving it just four weeks to March 1, would have meant bringing over £137,299, or a staggering £8000 more.
Two months later on May 17 and you would have saved £8,500 needing just £128,755.
Currency experts like Moneycorp can tailor its services to make sure you trade when exchange rates are in your favour and save you money.
A forward contract is just one of the services a currency broker can provide to clients making international money transfers.
You book to buy or sell your currency in the future, at a rate you fix today. Forward contracts can help protect against adverse currency movements and can be used to lock into favourable exchange rates.
Since November there has been a huge fluctuation from 1.11 euros per pound in January to 1.14 euros in February and up to 1.17 today.
The lack of direction suggests a steady relationship between the pound and the euro but it would be fairer to describe the alliance as a marriage of inconvenience.
For the euro and the pound the underlying problems are the same ones that have dogged them since the end of last year; debt and politics.
The common thread throughout the election run up was the way investors had been following the opinion polls. The more level the two main parties, the more investors shrank from buying sterling.
The chancellor’s forthcoming budget on June 22 should finally provide the pound with some direction.
The woes of the euro stem almost entirely from the maladministration of previous Greek governments.
In a situation dating back to Greece's fudged membership of the euro (many warned against it), the Athens government of the day used financial derivatives to conceal the true scale of debt in order to meet criteria set for membership.
Fortunately for Greece the EU Commission has now put a rescue package in place, however some disharmony still prevails.
In particular many other EU countries are concerned that the unrest in Greece may escalate to their own doorsteps if similar measures are put in place.
With all this uncertainty, let Moneycorp take care of all your money transfers to and from Spain; however small or large.
Our experts make the process quick, easy and highly cost-effective.

For more information on how Moneycorp can help get you more currency than from your bank contact Stephen Tiley in the Costa del Sol office on +34 951 319 700 or email stephen.tiley@moneycorp.com and please quote Goldacre Estates

Euro/Sterling Rates for Canary Property Purchase

The latest financial outlook from MoneyCorp on Euro / Sterling and Election fever: UK general election looms over sterling. Germany still playing hard-to-get on Greek bailout.

Although sterling had a slight downward bias it did not move far over the elongated week and was easily contained within a €1.1450 - €1.1650 range.

UK economic data played only the most minor role in sterling's fortunes. Of just a handful of figures only two did not relate to the residential property market. They were not very helpful. The CBI's distributive trades survey, a measure of retail sales, was steady at 13 and Gfk's consumer confidence index declined from -15 to -16. Mortgage approvals (the British Bankers' Association version) went up very slightly to 35k in March but fell well short of the 43k that analysts had predicted. The most positive result came with Nationwide's house price index. A +1.0% increase in April left prices 10.5% higher than a year ago.

Although the UK general election loomed ever larger over the currency, the prospect of a hung parliament did no particular damage. The most recent opinion polls put the Conservative party in the lead with the Liberal Democrats and Labour fighting for third place. If that were to be how the voting went and if it were to translate directly into parliamentary seats (neither can be assumed) a Conservative/Lib Dem coalition would be the most likely outcome. Investors fancy that between them Mr Cameron and Mr Clegg would be able to come up with a suitable plan to reduce the deficit. (The market's main problem is the three parties' steadfast refusal to explain which taxes will go up, where the spending cuts will come and how deep they will be.)

As with the pound, investors did not pay overmuch attention to the economic statistics from the euro zone. Not that there were many pan-Euroland data for them to examine. Brussels-sponsored confidence indices showed consumers (two points higher at -15) and industry (three better at -7) to be in a better mood. Economic confidence was three points stronger at 100.6. Inflation was virtually unchanged (provisionally) at +1.5% and unemployment was static at 10%. The best result came with Monday's purchasing managers' indices. The Euroland index rose by a point to 57.6, lagging behind Germany's better showing at 61.5.

For an nth week it was the Greek bailout that held investors' attention. There have been so many failed attempts at a rescue that it is almost pointless to review them yet again but the feeling of déjà vu is huge: The EU and - apparently - the rest of Euroland wants to dig Greece out of its debt hole in order to avoid destabilising the euro while Germany remains unconvinced that this is the only, let alone the best, way of going about it. As things stand, Germany says it will pay up only if Greece accepts its culpability and promises to mend its ways by subscribing to massive job losses and cuts to wages and pensions. Greece says it is doing its best but its citizens are not exactly lining up to be stripped of their financial security. Despite the protestations of success from Brussels there is not yet a done deal and there remains the real risk of contagion spreading to Portugal and Spain.

The early part of the week could well be a period of relative calm for sterling. Investors have made their best guess about the outcome of the election and what it will mean and must now sit on their hands to see what transpires. That enforced relaxation could well come to an end when the polls close and the results of the first exit polls hit the newswires on Thursday night. If ever there was a time for FX market users to join the ranks of the 'don't knows' this is it. If a weaker pound would totally scupper your investment plans the only safe course of action now is to cover the exposure completely. Otherwise, buyers of the euro should hedge 50% of their requirement and review the situation on Friday morning. Consider leaving an order on Thursday to provide protection in case there is a violent move as the results come out.

Source: Moneycorp

Sterling vs Euro for Property Purchase in Eurozone & Canary Islands

Latest on Sterling vs Euro and financial markets by Halo Financial for those buying properties in the Euro zone and Canary Islands:
Yesterday was a day of ooops moments; Gordon Brown forgot he was wearing an open microphone when he spoke insultingly and dismissively of a woman who had merely expressed her fears over unbridled immigration and the Eurozone suffered a couple of oops moments when Spain had its credit rating downgraded by Standard and Poors and when it seemed the Greek bailout could suffer further delays; delays that Greece can ill afford. There was a bright spot for Greece though in that the International Monetary Fund suggested the bailout package could be more than double the initial estimate of €45 billion that was mooted a few weeks ago.
Apart from being long overdue in many analysts’ eyes, the Spanish rating downgrade was seen by many as a warning shot across Britain’s bows; a strong hint that unless the next government gets to grips with our debt problems straight away, Britain too could have its sovereign debt rating lowered. Apart from being just plain embarrassing, it makes servicing the existing debt more expensive because, just as Greece is discovering right now, a lower credit rating means a country has to pay a premium over and above bonds in countries like Germany and America, to lure investors. When you owe as much as Britain does, even a small premium sucks significant funds out of the domestic economy and hampers growth.
So when the dust had settled on all of that, the outcome was that the Pound fell, the Euro fell and the US Dollar which is the global safe haven these days, strengthened across the board. Of the Pound and Euro, Sterling had the most to lose in the short term because it has been doing rather better than the Euro of late and Gordon Brown’s faux pas made the hung parliament story spring back to life. I know the threat to the economy of a coalition government is being downplayed by all manner of ‘experts’ and politicos but the fear of a lack of clear leadership is the issue that dogs the Pound whenever hung parliaments are mentioned and I don’t think it is a debate with an answer until the election is over and, if we are to have a hung parliament, the wrangling and negotiating about the form that the next government will take is concluded.
In other news we saw the Reserve Bank of New Zealand leave its base interest rate on hold last night at 2.5 percent. Not only did the RBNZ do as many had forecast they would but they also suggested the tightening cycle, when it comes, would not have to be as fast and furious as had previously been thought. This is a factor of the steadier recovery than we had all hoped for. The New Zealand Dollar weakened a little against most currencies when the announcement was made but Sterling was on a slide anyway so the Sterling - NZ Dollar exchange rate is actually 5 cents lower this morning than when it peaked earlier in the week.
We also had an interest rate announcement from the US Federal Reserve late yesterday and, just like the RBNZ, they left their base rate on hold but their current level is much lower than the Kiwi base rate. The Fed is currently operating on a variable Fed funds rate between 0.0% and 0.25% and they reiterated their view that this will remain the case for some time to come. However, they did change a couple of lines in their well read standard statement; they saw both the housing and the employment markets improving slightly whereas in previous statements they have commented that these areas were flat. Don’t laugh but these miniscule changes in central bank communiqués get some analysts in a right old tizzy. It is certainly enough to move the US Dollar but that is already being bought heavily by investors seeking the safety of the US bond and equities markets.
Today is a quiet one on the data front with no more than a smattering of EU data to keep the financial market roulette tables spinning. We get EU money supply data and three economic confidence indices to mull over along with German employment data. This evening’s main event is the last of the party leader TV debates before polling day and it looks set to be a corker. I think we should have a sweep on how many times Gordon Brown’s “bigoted woman” comment gets alluded to, another on how many times the word ‘Brave’ is used to describe those in the armed forces in that rather patronising tone that politicians tend to adopt when they speak of the military personnel and another on how many times the word ‘change’ is used. This being the last chance for the three of them to make their mark, it looks set to make for very entertaining viewing.
Have a great evening’s viewing. Popcorn anyone?