Charles’s Thoughts: Sterling suffered a rather poor week on the markets thanks to an array of poor data and publications released throughout the week. Improvements from the previous week’s trading which had seen sterling hit multi-week-highs against the euro and US$ unwound gradually as confidence in the pound dwindled. Wednesday’s budget announcement from the Chancellor, the release of the Bank of England meeting minutes and jobless figures for March combined to weaken sterling with weaker-than-expected UK GDP data compounding the losses on Friday. We learnt this week the level of UK government debt we as a nation will be taking on over the next few years. The figures are based on what some say are over-optimistic predictions and therefore could well be substantially worse than forecast. In spite all of this, sterling remained rather resilient given previous months’ performances and keeping over the €1.10/£1, despite the poor news and data, could be seen as a positive.
The US$ is still as much at the whim of the risk-appetite/aversion phenomena now as it was when the ‘flight to quality started’ in August last year. This holding of the US$ as a safe-haven asset has maintained despite the efforts of many governments around the world to stabilise their respective currencies by conventional or unconventional monetary policy. There was little other major US economic data from the week beyond Friday’s Durable Goods Orders and although better-than-expected there seems to be very little upside to the US$ now and it may have already reached the peak of its powers.
Euro-zone economic data was very thin on the ground this week. The lack of significant news as well as the poor performance by sterling and the US$ flattered the euro, eventually closing roughly 2% higher against both currencies. The US equity markets have enjoyed six consecutive weeks of gains and this optimism has been supported by some encouraging housing market data, but as before, in the current market positive US economic data has encouraged risk-taking and resulted in a weaker US$.
Sterling fell broadly against the high-yield and/or commodity backed currencies this week. Canadian $ interest rates were cut mid-week resulting in marginal mid-week losses across the board.
Why is Currency Management So Important? Using a bank could cost you £3-4,000 per £100,000 transferred. Buying at the “wrong” time could cost you many £’000′s more as rates can move as much as 3% in a very short period of time. Then add in transfer costs that the banks charge for sending and receiving funds and you could be looking at additional costs of £10,000 per £100,000 transferred. By developing a currency strategy and by working with a specialist currency broker these losses could be minimised if not eliminated.
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How much will a Property Cost? To estimate the cost of a property simply DIVIDE the price of the property by the appropriate rate noted above. But note this is based on the inter bank rate so the actual cost will be slightly more.
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