Is Sterling out of the woods yet?
Is sterling out of the woods yet? A fair question given what we have been through and the vast amounts that have been thrown by our government at the banks and the economy in a desperate attempt to stave off a depression.
My response tends to be conditional. I think most people would agree that sterling is too low against the euro and, even though we may never return to a rate of over €1.50/£1, most consider a rate of €1.20+/£1 feasible.
So what is stopping us getting to this rate? Uncertainty on two fronts. Firstly, we need to see a period of financial stability and a period in which we can see the world economies moving forward not backwards. This is a matter of time and is likely to be measured in months and perhaps even years. Also we need to be sure that the UK does not need to go to the IMF cap in hand for a bailout, given the huge debts and problems we have. Timescales for this scenario are shorter but if it happens then sterling will lose value very quickly and we may look at the current value of sterling as the halcyon days when £1 was worth more than €1.
That is why I always ask clients to have a clear and realistic exchange rate in mind when they are looking to buy currency. Because trying to guess what is going to happen tends to be a fools game with exchange rates doing the exact opposite of what you hope or expect. When this happens great uncertainty arises, leading to increased stress levels as you need to find further money or have less than you expected. Not a great outcome and something that could be avoided or at least minimised by have a partner such as ourselves working with you.
Charles Purdy is a Director at Smart Currency Exchange Limited – the only international payment specialists in the UK that work specifically to help people moving money for property purchases or for regular payments such as mortgage or pension payments. To move money to Cyprus or repatriate back to the UK go to www.SmartCurrencyExchange.com for further information.