Forex News: ‘Sit on Your Hands for a Week,’ Currency Expert Says

spanish property forex foreign currency pound euro question

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

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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.

The Pound has gained 4.6 per cent against the Euro in 12 months.
The Pound has gained 4.6 per cent against the Euro in 12 months.
Luke Trevail is a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number.


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SPI Member Comments

Thoughts on “Forex News: ‘Sit on Your Hands for a Week,’ Currency Expert Says

  • Still nowhere near the rate of 1.65 during the boom years which made property appear cheap, and the higher sterling goes against the euro the less sellers of Spanish property get when dealing with British buyers! Sterling still buys approx. 25% less Euros than it did which currently cancels out property price falls so no big savings there.

    BOE now talking of raising interest rates, when this happens investors will pour into the UK as a safe haven for their money, as the Euro and Dollar weakens.

    Only buy for lifestyle, not for investment.

  • Being somewhat unfamiliar with the dynamics in the euro price-setting, can we also expect fluctuations leading up to the June 5 meeting, based upon the actions of nervous currency speculators?

  • Actually, the run up to the bubble saw the euro/Sterling exchange rate at 1.45 (not1.65) and with it now hovering around 1.23 and poised for a burst to 1.25 we are looking at a cost impact of about 15%. Setting this against a fall in Spanish House prices of 35 to 45% still means there is good value to be had in Spain.

    As sellers of Spanish property receive euros (not sterling) they are not affected by the exchange rate unless they are moving to another currency themselves.

    Buying assets or investments in a foreign currency adds an additional dimension which can work in your favour or against you. I agree with the articles author. At the moment there is more upside potential for sterling vs euro.

    Just look back at the trend in June/July 2012 to see how quickly the pound can go up…and back down.

  • Rubbish Perry, Lol, how come we bought our Spanish properties at a rate of 1.64 euros to the pound. You’re talking a load of tosh, as British sellers of Spanish property they are subject to a loss if they need to convert to Sterling, why would the many Brits wishing to to sell their Spanish homes want to convert to another currency other than Sterling? PML!

    So, back to my point, with Sterling once trading at 1.65 euros there’s still another 25% to go before it becomes good value!

    Spain adopted the Euro on 1st Jan 1999 and it was then ‘book money’, notes and coins were used from 1st Jan 2002.
    In 2002 the minimum exchange rate was 1.537279 and the maximum was 1.641497. We fixed at 1.64 in advance of our stage payments.

    Prior to this date 1999 the book value max rate was 1.609010, yr 2000 was 1.751007 (yes as high as that), yr 2001 was 1.674201 max, these figures were used for off-plan properties being built with stage payments when people could fix rates.

    Are you an agent,?Lol

  • Yes. The average Sterling/Euro exchange rate for 2002 was 1.59. Meanwhile if the pound now rises and the Euro falls this is good news for UK buyers hoping to acquire a Spanish property. But of course it is exactly equally bad news for any Brit who owns Spanish property and hopes to sell it and move back to the UK.

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