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 .

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.