The situation in Europe is continuing to dominate currency markets. I reported last week how currency investors were continuing to give Sterling ‘the benefit of the doubt’ against the Euro as it had managed to hold its recent highs against the currency – rather than becoming susceptible to the chaos in Europe itself due to the UK’s own close links with the Euro-zone.

This is still just about holding true. Sterling dropped overall by a very minimal 0.16 percent on the Euro meaning that we start this week at around a mid-market rate of 1.166. More pressure was put on the Euro last week as Italian borrowing costs soared, Fitch ratings agency downgraded Portugal and concerns heightened over a lack of progress between European nations on how to temper the Euro zone debt crisis.

Although this helped to ensure that Sterling maintained its position on the Euro, it had the adverse effect on Sterling’s position against the Dollar (as well as all other ‘safe haven’ currencies such as the Japanese Yen). Sterling plummeted by a huge 2.31 percent on the Dollar over the course of the week to a seven week low. This means that we kick off this week with Sterling at a mid-market rate of 1.543 against the US currency. If you have US Dollars to transfer back to Sterling this is fantastic news about the way the markets seem to be heading – however if you need a Sterling to Dollar transfer in the next few months, it may be a good idea to speak to me about the protective measures you can take to safeguard yourself from further drops.

This fall against the Dollar happened despite some improvements in key UK economic data last week – figures for UK mortgage approvals and the Government’s public borrowing came in better than expected. Similarly, the Bank of England minutes revealed that no more policy makers had yet voted for another increase in quantitative easing to shore up the economy which should have helped to ease concerns that this will happen as soon as some thought. This all confirms the overall picture at the moment, that the global economy and in particular, developments in Europe are dominating currency movements, more than internal economic news from the UK itself.

Saying this however, next week offers an interesting mix of economic events and news. Euro-zone finance ministers are meeting again to discuss the bail-out fund but the chances of them making a significant announcement is not very high. It may be therefore that Sterling can manage to hold against the Euro if lack of progress in Europe remains the major concern.

UK events however may also be thrust further into the limelight next week, with the autumn budget report due. This is expected to outline the challenges ahead for the Government and lower expectations for how well the UK may meet its deficit targets. This could be a firmer signal to investors of troubles inherent in the UK economy and put even more pressure on Sterling against the Dollar and other safe haven currencies that are rapidly building strength due to the uncertainty over the Euro zone. Hometrack, Nationwide and Halifax house prices are also coming out over the course of the week which could highlight further weakness in the UK property market and have a negative impact on Sterling.

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.

Instantly Download Currency Secrets - our 31 page guide 100% FREE TODAY!