This week we are seeing a continuation of similar currency trends as reported in last week’s blog – once more, Sterling has lost more ground to the Dollar whilst managing to claw back against the Euro. This has been largely caused by intensifying speculation over the extent of debt problems in Greece just as a Portuguese bail out heats up. Markets finally glanced away from their intense focus on interest rates as they digested Trichet’s comments that the next European rate rise will not be immediate. Things also came to a head this Monday as finance ministers met up to talk about sovereign debt issues to the backdrop of the widely reported arrest of the head of the International Monetary Fund, Dominique Strauss-Kahn, which has led to some uncertainty over leadership and whether financial measures such as those affecting Portugal may be delayed. These issues tarnished the positive GDP data from Europe at the end of last week which revealed that GDP had grown faster than expected.

Those needing to purchase a property in Euros should therefore be aware that Sterling has gained 0.39 percent on the single currency over the past week. This was not without the usual twists and turns however with the currency falling down to the 1.11s against the Euro on Sunday before rising again on Monday. I have an increasing amount of clients selling properties in Europe who need to make Euro conversions back in to Sterling. If this is you, then we need to keep an eye out for these sudden movements as the sort of sudden rate seen on Sunday is great for a Euro - Sterling conversion. One way that you can make sure that you do not miss a rate, even if is touched momentarily, is to use an automatic market order – this means that if your target rate of exchange is hit even when our office is closed overnight or at the weekends, the money will be automatically exchanged for you. Feel free to give me a call to discuss whether this could be a good option for you and how it works.

It was another weekly drop for Sterling against the Dollar which benefited even more from Euro weakness than the Pound. This will not come as good news for those purchasing investments in the US. The fall was quite hefty with the Pound falling by 1.04% on the newly robust Dollar. Better than expected farm payroll data from the US in the previous week had helped the currency and the positive inflation report from the Bank of England, cementing opinions that a UK interest rate hike will happen later this year, was not enough to overcome the newly unstoppable Dollar. Although both the UK and US trade balance figures last week showed worse than expected deficits, the UK’s figures were particularly short of forecasts.

The biggest event for Sterling this week will be the Bank of England minutes on Wednesday. Markets will be rushing to find out whether there was any new support for a rate hike revealed in the voting patterns of members – if this were the case, Sterling is likely to receive another upwards push against the Euro.

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.

Budget-day in the UK has already seen some significant Sterling movement with the Bank of England minutes this morning causing the Pound to depreciate in value. With no new policy members voting for a rate hike, the minutes did not suggest that an interest rate rise will occur any earlier than already thought. This has sapped some of the gains made by the Pound yesterday on the back of the soaring inflation figure at 4.4 percent. The UK budget this afternoon will be watched by currency markets in order for them to interpret how well the economic recovery is likely to continue.

Pound Sterling – UK Markets

Following a surge in Sterling yesterday bought about by the soaring inflation levels up to 4.4.percent, the Bank of England minutes have arrived this morning to dampen Sterling and send it lower as they revealed that there have been no further members voting for a rate hike. The minutes last month helped Sterling gain as they revealed an extra member had joined the rate hawks in voting for a rise - but this month there were no new additions and the same three members voted for a rise. The timing for the predicted 0.25 rise was also termed as likely to occur in ‘the middle of the year’ whereas last month the minutes had been a little more promising suggesting the hike would come in ‘early summer’.

The fact that most members are waiting for more sustained growth figures has not helped the currency as we also encounter the UK budget today.

US Dollar – US Markets

The Dollar has been gaining back on the Pound so far this morning following the UK Bank of England minutes but dropping against the Euro although the movement has been volatile. With so much focus on European and UK interest rates, as well as debt issues in Europe and the UK budget this afternoon the Dollar is really responding to broader themes meaning that new home sales data this afternoon is likely to be overlooked.

Euro – European Markets

The Euro has come under pressure as both Ireland and Portugal have moved back into the spotlight for struggling to pay off their debt. A vote on austerity measures in Portugal today is making the Euro particularly vulnerable on speculation that the measures will not be passed which may then subsequently incite a resignation from the Portuguese Prime Minister. Whilst the possibility that European interest rates could rise as early as next month has been fuelling the Euro, lingering issues over debt are coming back to the fore. As well as the situation in Portugal, rumours are circulating that Allied Irish Banks are planning to miss a coupon payment struggling to have enough funds.

Other Currencies – Highlights

The Swiss Franc has risen alongside the Yen as a safe-haven with ongoing uncertainty about radiation in Japan leaking from a damaged nuclear plant.

The safe haven currencies are also strengthening in response to the alliance-led planned attacks on Libyan ground forces.

For anyone UK-based buying property in Europe, a change has occurred in the cost price to the property of around 4 percent over the past two weeks, purely through the Sterling to Euro exchange rates. Over the past two weeks, the Pound has moved up from the 1.16 levels against the Euro, first reaching the 1.20s and then faltering again at the end of last week to find itself at around the mid 1.19s at the start of this week.

As many property buyers see 1.20 as the key resistance level, ideally hoping that they can achieve a rate of 1.21 or 1.22 for a Pound-Euro transfer, it is a good idea that they speak with me at Currency Solutions early. This way, I can make you aware when Sterling pushes through this barrier and discuss the options available to you about fixing into this rate – even if the actual exchange doesn’t need to happen for several months. Some clients like to put an actual ‘market order’ in place where funds can be automatically exchanged at the target rate. Others prefer a more flexible approach and to be regularly in touch with me to monitor the exchange rates as they develop.

What has caused these fluctuations against the Euro? The most recent moves have been largely due to events in the Euro zone. Amidst rumours that Portugal will be the next nation to require an EU bailout package after Ireland, bond auctions held by Portugal, Spain and Italy were surprisingly successful last week. These events helped to shore up confidence about the state of Europe’s economic recovery which is why we have seen Sterling move slightly lower against the single currency. Saying that however, this week could shake things up and certainly so far today has seen the Pound gaining back ground on the Euro. Several meetings this week could bring more movement to the Euro rates including finance meetings taking place concerning whether or not nations can agree on whether to increase the size of the bail out funds as well as the vote of confidence on the Irish Prime Minister tomorrow. It is not impossible that Sterling could make it back up above 1.20 if the outcomes of these should be negative or fuel uncertainty in Europe.

The Pound has been gaining strength against the US Dollar and is starting the week at around the 1.59 levels. The Dollar has shown some weakness in the face of Euro strengthening and comments from rating agency Standard and Poor’s that the US credit rating could be at risk has also created some downwards pressure. With both the UK and the US facing a week of mixed data, both the Pound and the Dollar could experience volatility.

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.