Last week was volatile for the currency markets with a roller-coaster of events influencing exchange rate movements – first the US debt limit was extended, then moves were taken by the European Central Bank to buy back bonds as fears of the debt crisis engulfing Italy and Spain accelerated, and since the close of markets on Friday, ratings agency Standard and Poor’s has gone through with prior warnings and downgraded its rating on the United States to AA+.

What does all this mean for the international property investor who is interested in how the Pound is doing? Overall, Sterling dropped by 0.19 percent against the Dollar over the week and gained on the Euro by 0.54 percent. Movement was certainly erratic however, with the Pound in particular moving both up and down against the Euro in the early part of the week. The European debt crisis issues in the second half of the week allowed Sterling to capitalise on the single currency. The slight drop against the Dollar, can be put down to the Dollar’s use as a ‘safe haven’ currency by investors, as the panic about the spread of European debt between Euro zone nations hit the headlines.

These large-scale global events diluted the impact of internal economic news coming from the UK. Manufacturing PMI data early in the week was disappointing and yet another stagnant hold on interest rates at 0.5 percent on Thursday did not make for inspiring reading on the UK economy. Despite the fact that most economists are continually pushing back their expectations for when an interest rate rise will occur in the UK due to this kind of lacklustre data (with predictions having moved from summer 2011, to late 2012, to now even later – 2013) the Pound is currently still managing to keep up momentum from these external global events damaging confidence in the Dollar and the Euro. Looking at the month as a whole, the Pound’s strengthening has been consistent, with Sterling having grown by 2.31 percent on the Dollar and 2.78 percent on the Euro.

Although the agreement on the US debt limit also took downwards pressure off the Dollar last week, this may all change as markets assess the fact that Standard and Poor’s have now downgraded the US credit rating over the weekend. Some economists are therefore predicting we may see more downwards movement in the Dollar at the start of this week. Should the European crisis continue to escalate this week with more evidence coming to light of the flow of debt between nations, Sterling may also seize the opportunity to gain yet further on the single currency.

However, it will be important to look out for the impact of the inflation report and Bank of England Governor’s speech on Tuesday – Mervyn King sometimes has the tendency to talk down the UK economy which can have a negative bearing on the Pound.

For further advice on how to save thousands on your property purchase compared to the bank, protect yourself from currency movements or set up regular mortgage transfers, get in touch with the dedicated Property Secrets currency specialist: Nigel Hodges of Currency Solutions on +44 (0) 207 740 0000 or by clicking HERE to leave an enquiry.

I reported last week that Sterling had lost out by 2.73 percent against the Euro in a single week following two weeks of negative data with poor UK GDP, and the worst manufacturing figures for twenty months signalling that the UK recovery was certainly fragile. The clash of UK and European interest rates on Thursday last week saw both economies hold their interest rates for another month. This was mostly expected and despite some more poor data from the UK, including a higher trade deficit, the Pound climbed on the Euro on the week overall, little by little regaining some of the lost ground on the Euro. Sterling was helped along by speculation circulating surrounding European debt, including claims towards the end of the week that Spain may be next in line for a European bail out as it was suggested that Santander experienced a failed bond auction. Comments from the European officials last week that seemed to hint that European interest rates may rise by another 25 points next month did not help lift the Euro. In total, Sterling gained on the Euro by 0.76 percent meaning that we start this week with Sterling in the early 1.13s on the Euro. This is still not the kind of exchange rate that makes pleasant listening for any UK property investors who need to make an exchange into Euros to purchase European property. If you want to know how to handle your exchange, it’s a good idea to give me a call or make an online enquiry letting me know the time frame for your property completion. I can talk you through the trading options available for you to decide how you would like to proceed and help you feel confident that you are more protected from any further currency fluctuation.

Despite clawing back ground on the Euro, Sterling dropped against the Dollar throughout last week by 1.21 percent overall so we start this week around the low 1.62 level. The US economy was one of the few major economies that experiences positive economic data last week  - the trade deficit narrowed,  the import price index was healthier and jobless claims had also reduced. The Dollar was also very much helped by the lingering debt problems surrounding European nations such as Greece as a clear flow of funds by currency investors into the ‘safe-haven’ currencies gave a lot of support to the Dollar.

Key events for the UK this week will be retail and consumer figures on Tuesday, unemployment figures on Wednesday with further retail figures on Thursday. The European Central Bank report on Friday will provide a further detailed analysis of the European economy from the Central Bank and may shape the sentiment of currency investors and cast some influence of the Sterling Euro pairing.

For further advice or how to save thousands on your property purchase compared to the bank, protect yourself from currency movements or set up regular mortgage transfers, get in touch with the dedicated Property Secrets currency specialist: Nigel Hodges of Currency Solutions on +44 (0) 207 740 0000 or by clicking HERE to leave an enquiry.

Over generous, foolish or long term economic stability. Whatever your view, Labour’s parting decision to bear a fractional brunt of any bailout necessary within the EU will cost the UK in the coming months. Currently, the single currency sits in a very precarious situation with Portugal requiring a bailout and many suggesting that the plague may spread through Spain as well. Not that the rates reflect this…

Pound Sterling – UK Markets

As predicted, Sterling saw further positive gains against the US Dollar as reports proved correct that the Producer Price Index rose at a faster pace than last month. However, whilst the ECB decided to raise interest rates, BoE decision makers held rates firm at 0.5% as expected even though concerns continue to grow over the excessive rates of inflation.

On the flip side, UK house prices continued to fall as banks reported weakening demand in the sector. Average house prices in England and Wales declined by 0.1% from February whilst mortgage approvals actually gained by 4.3% last month to the highest levels since May last year. Mixed reviews across the board are set to confuse us all over the coming weeks.

US Dollar – US Markets

Conventional theory suggests that more often than not, should the Euro strengthen, the US Dollar should fall in sequence. With this in mind it has come at no surprise that both the Euro and Sterling have seen further gains against the dwindling currency.

Currently, everyone has their own view on the state of the US Dollar and with other nations appearing to gain momentum in the global economic recovery; your broker may be able to shed some light on the current state of the world’s power nation.

Euro – European Markets

Following the ECB’s decision to raise interest rates by a quarter of a percent up to 1.25 % yesterday, it appeared as though the currency markets had already factored in any possible movements. On the back of this, the ripples of the decision later seeped into the German export markets which climbed a whopping 2.7% in February causing the Euro to strengthen further against both the Dollar and Sterling.

However, with most of us feeling that Euro currently represents a very false representation of the true situation currently facing the continent, ECB President Jean Claude Trichet placed stark warning over the true picture. He placed great emphasis on the debt issues facing several nations and the overall bleeding effect that may eventually occur should Spain follow Portugal by going cap-in-hand to the EU. Spain strongly refuse that they will do so but most feel that this may be just be denial.

Other Currencies – Highlights

Few of our clients may not actually be aware that we are one of the only Foreign Exchange Brokerages in the UK to offer the Brazilian Real as a tradable currency. As an emerging currency, the BRL has seen further gains this week as Finance Minister, Guido Mantega announced long term currency appreciation is a given. The real gained up to 2% against the US Dollar on the back of this to its strongest intraday level since last August.

Following the recent disaster in Japan, both the Australian and New Zealand Dollar continued their recovery as traders added to thoughts that a further interest rate rise is expected over the next 12 months.

For further advice or how to save thousands on your property purchase compared to the bank, protect yourself from currency movements or set up regular mortgage transfers, get in touch with the dedicated Property Secrets currency specialist: Nigel Hodges of Currency Solutions on +44 (0) 20 7740 0000 or by clicking HERE to leave an enquiry.