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Sterling improved by around 0.85 cents against the Euro on Friday as markets continued to favour the Pound over the single currency in light of Thursday’s surprising Central Bank statements.
The Euro came under selling pressure in response to a downbeat speech from ECB President Mario Draghi, which wrong-footed investors who had anticipated a repeat of Draghi’s optimistic speech in January. Simultaneously the Pound was supported in reaction to soon-to-be Bank of England Governor Mark Carney’s insistence that further quantitative easing may not be necessary to re-ignite the UK economy.
Sterling’s gains were also influenced by an unexpected fall in the German Trade Balance from €16.9 billion to €12.0 billion in December.
However today it is on the wane once more down -0.66% to 1.174 as positive market sentiment returns to the Euro once more. Why I cannot say but the why is never really relevant in Forex markets.
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Don’t quite understand why some people get so excited that the pound rose against the euro a bit last week, but then fell back, only to rise again as you said logan, but then falls again. It’s bound to be volatile.
The main thing though is that it’s a dreadful exchange rate for Brits buying or living in Spain compared to what it used to be, these small fluctuations, make little difference to day to day costs, 9-10% though does make a difference on whether it’s a good time to buy in Spain or not 🙄
This is just my opinion, I would not feel comfortable buying until the rate came back to 1.45 +, that would make a significant difference to potential buyers, but not likely for a while. 😉
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I can’t see the pound getting much higher…unless one of the Eurozone countries exits. Suppose Brits who are selling could afford to drop their price a bit more if they are converting back to pounds. Residents whose income is from the UK are the worse off. If they bring an average of £2000 pm into Spain, quite a drop on their euros!
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For those of you who are interested in currency movements and their consequences there is an excellent article by Jeremy Warner here.
It’s very interesting to compare the disaster of the gold standard after the great depression of the thirties and the Eurozone today. It basically portends the peripheral EU states are economically doomed. If you seek to know the future look at the past.
Japan seems to have realised that the way forward is a weakened Yen. Let the currency wars begin. -
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Apparently George Soros is shorting Sterling in the same way that he shorted Sterling back in 1992 that was called black Wednesday which resulted in Britain leaving the ERM. George Soros has also shorted the Yen recently and has made one billion dollars from it following the announcement by the Japanese Prime Minister that he wanted a weaker Yen and the currency has been dropping in value since.
Sterling is dropping in value partly because of the recovery in the Euro and partly because Britain’s debt is about to be downgraded by the rating agencies and partly because Britain’s economy is about to enter a quadruple dip recession or more accurately a recession in perpetuity and partly because Gilts or British Government bonds are so over valued and as such are generating such little yield (return) that there is going to be a collapse in the demand for British bonds. Will this require more Bank of England intervention to buy up Government bonds in the form of more QE? More inflation is on the way then!
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The MPC voted six to three against further QE today, which should stabilise the pound for a time. The outgoing Mervyn King voted for more QE, but his influence is fading.
But the new man, the Canadian, seems just as hell bent on printing more money.
It now looks as though the future of the pound Sterling against the Euro is in the hands of the Italian voters, and for them to even think about voting Berlusconi back in means that I know absolutely nothing about Italian politics, and hence very little about the pound/Euro either.
It’s 1.14 today, a meaningless number until you visit the cashpoint. I’ve just been and nearly needed my handkerchief.
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Sterling has probably reached fair value against the Euro 1.14 and the Dollar 1.54.
If you compare what identical things cost in the Eurozone to the UK, making allowance for extra taxation you will find prices are fairly similar at these currency levels. In fact you could even justify Sterling parity with the Euro. It’s this that currency traders see as a goal to reach and short the currency as a result.It has nothing to do with economic fundamentals. Most of Europe is in the same dire situation, it’s just dealers making a buck.
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@logan wrote:
If you compare what identical things cost in the Eurozone to the UK, making allowance for extra taxation you will find prices are fairly similar at these currency levels.
It’s more to do with the British governments attempts to prop up the GDP and economy. Devaluing the pound against the euro simply makes exports cheaper and more attractive to Eurozone countries. Their euro buys more.
The fact the QE and pound devaluation constantly increases inflation by making things more expensive is a price they’re prepared to pay. They don’t care one iota it keeps hurting the population.
The British government are between a rock and a hard place of which they cannot easily escape apart from ramping up inflation.
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@katy wrote:
What if the UK needs a bailout…who would bail it out! They would have to default and the pound will slide.
🙄
Where do you think the money comes from to bail out EU countries? The European Central Bank (ECB). Where do you think the ECB gets the money from to to bail them out? Yeah, they print it – Quantative Easing.
Now who do you think is going to bail out the UK? They bail themselves out by printing money – they’ve done it 3 or 4 times so far and it still isn’t having the effect they want on the economy apart from increasing inflation.
The UK doesn’t need a bail out from the ECB like the EU countries do because their currency isn’t tied to the euro.
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@logan wrote:
Sterling has probably reached fair value against the Euro 1.14 and the Dollar 1.54.
If you compare what identical things cost in the Eurozone to the UK, making allowance for extra taxation you will find prices are fairly similar at these currency levels. In fact you could even justify Sterling parity with the Euro. It’s this that currency traders see as a goal to reach and short the currency as a result.It has nothing to do with economic fundamentals. Most of Europe is in the same dire situation, it’s just dealers making a buck.
That’s exactly how I have always measured the pound in my pocket, while living in Spain. It was cheap to live here under the Peseta, and the Euro when it first came out, but since then the pound has been slowly degraded.
Chicken and whisky are still comparatively cheap, and fresh vegetables if you go to the markets, and fish if you buy at a fishing port, but if you shop at Mercadona then it’s much the same as Tesco’s back home.
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I agree the BOE are seeking a lower Sterling for the knock on benefit to the economy. However today’s rate of 1.14 is not actually very low. In any case UK is not totally dependent on exports so it’s a false premise.
Brits living abroad with a Sterling income get used to extreme values of Sterling €1.50 for example at the top of the boom. I actually believe the BOE preferred value of Sterling is parity with the Euro.
That value would have never been agreed by the EU when UK began negotiations during the Thatcher government when Ken Clarke tried to convince his party the Euro was a good idea. Then the accepted value to enter the Euro was fixed by the EU at 0.76p to €1.
It seems clearer that monetary stimulus by BOE has reached the limit of it’s usefulness. Where the UK can go from here is anyone’s guess. Slashing taxes to create more consumer demand is my best suggestion. UK is a service economy consumer demand is therefore essential.
Inflation can be dealt with much later. In any case it reduces debt value.
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@jakesuper wrote:
Unemployment figures for the UK showed a surprise fall which I suspect is because Richard Briers died the other day.
And yet receipts from PAYE tax and insurance are down?
What has happened is that the government “nudge” has worked. People know they can go “self-unemployed” and then claim tax credits, without any of the hassle they get when trying to claim dole. The government can then claim they’ve presided over a drop in unemployed.
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creative intensity,just continue..thank,s.http://alpari.com/es/investor/pamm/about/
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