Editor’s Note: The Pound is up 4.6 per cent over 12 months against the Euro, reducing the cost of buying a Spanish home by thousands, if not tens of thousands of Pounds, for cash buyers from the UK. Foreign currency exchange specialist Luke Trevail looks at the factors driving exchange rates, and what the near future might hold.
By Luke Trevail of TorFX
My prediction of Euro weakness becoming a significant factor on the currency markets looks likely to materialize over the next few weeks, perhaps.
In the May Central Bank policy meeting Mario Draghi the European Central Bank President suggested that they will need to look at potentially cutting interest to an unprecedented 0% and introducing stimulus designed to aid the economy over the coming months.
This all sounds very familiar as the Bank Of England spoke of similar requirements in the weeks before Quantitative Easing was put in place.
Focus now to June where the next monthly meeting will take place and these measures may begin to be introduced. The single currency has been weakened off the back of Draghi’s comments, and subsequent opinion from central bankers that suggest that it’s now a question of when not if this rate-shaking move will happen.
As a guide for those of you that have been waiting for a return to the ‘good old days’, when the Bank of England started it’s QE package sterling fell by 8 cents against the euro in just 2 weeks, the opposite move in euro buyers favour could be a realistic assumption when the Europeans act the same way.
My Spanish property forex message for now to anyone looking to move funds immediately is to sit on your hands for at least a week, to see what happens on the next meeting on 5th June. Sellers of the euro into Sterling however, you are well advised to seriously consider your position and converting now may hurt but it certainly won’t be as bad as it could get in the next few weeks.
A quick word on the pound also; The UK economy can look at Europe with much empathy as it’s been there and done that when it comes to rate cuts and quantitative easing, but the long difficult road it went down when these stimulus measures were introduced has been a lonely place. The end of that road and the highway to recovery is now where we are however, so a swing in the currency markets to the favour of those with Sterling to sell is likely to be what we see moving forward.