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Jack
Advanced Member

United Kingdom
205 Posts

Posted - 11/05/2010 : 22:05:59

Hi Hod

If you are right the drinks are on me! It's about time we stop sacrificing the value of the pound due to a flawed political agenda.

If there is support at that level who knows we could see a steady curve to 1.25 by year end?

thecrock
Advanced Member

United Kingdom
274 Posts

Posted - 24/05/2010 : 20:12:35

Last week we witnessed another volatile week for Sterling against the single currency with a 3.2% fluctuation in exchange rates across the week. In real money terms, this equated to a difference of over
£5,500 when purchasing €200,000. The movements came following a series of economic announcements in both the UK and the Eurozone further proving the fragile state of both economies and in turn their
respective currencies.

The main details of note from a UK perspective came in the shape of the Consumer Price Index showing a hike by 0.6% taking the annual rate to 3.7%, higher than the expected 3.5% that had been forecast making the current level the highest seen in 17 months. This was followed by the Bank of England minutes which showed an expected 9-0 vote from the Monetary Policy Committee to hold the base rate at 0.5% and pause its quantitative easing program at £200bn. The final piece of data released on Friday saw the UK’s budget deficit revised down to £156bn from £163bn. With reducing this figure a top priority for PM Cameron and deputy PM Clegg the news would have been well received as the new coalition government attempt to bring
the UK out of the financial crisis it is still in.

The biggest news of the week in the Eurozone came from Germany where Chancellor Angela Merkel announced a ban on naked short selling. This caused investors to sell off the Euro causing some short term
weakness for the single currency. This was followed by negative economic sentiment figures from Germany and the Eurozone as a whole with figures of 45.8 and 37.6 respectively being released.

When reviewing the weeks activity and the highlights listed above it further proves that Sterling is still in a fragile state. In normal circumstances last week would have surely led to significant strength for the Pound with negative news in the Eurozone and positive news in the UK.

The week ahead sees a host of data releases for both the UK and Eurozone starting with the UKs revised GDP figure released on Tuesday morning. The other main releases are the UKs mortgage approvals, house pricing index and consumer confidence figures. In the Eurozone we will see consumer confidence figures and German CPI data released on Wednesday and Thursday respectively.

Report from the Foremost Currency Group

Hod
Advanced Member

United Kingdom
913 Posts

Posted - 26/05/2010 : 16:08:24

Euro hits 2 week low against Sterling

Currently trading at 1.1790

Range over the last two weeks

High 1.1790 ( today ) hit / touched 1.1865 late evening on 11 May 10

Low 1.1390 ( 21 May 10 )

The euro has moved lower( against Sterling and US$ ) each day for the last 3 days, mainly ? on the back of Spanish Bank news over the weekend.

The euro fell broadly on Monday Tuesday and Wednesday, pulling back from gains last week, after the Spanish central bank's takeover of a savings bank added to jitters about debt problems in some of the weak euro zone countries.

The Bank of Spain said on Saturday it had taken over the running of CajaSur following the failure of its planned merger with another regional lender.
The move highlighted the weakness of the banking sectors of some euro zone members, already suffering from fiscal problems and struggling to bring down their budget deficits.

15:54 26May10 -Euro falls 1 pct vs sterling, hits 2 week low
LONDON, May 26 (Reuters) - The euro fell one percent on the day to hit a two-week low versus sterling on Wednesday, on the view that the sovereign debt and banking sector concerns in the euro zone are more severe than in the UK.
The euro fell 1 percent to hit a low of 84.82 pence = 1.1790 euro to £ 1 sterling, its weakest since May 12.
"Euro/sterling should be moving lower because the UK does not have the concerns about potential default or a restructuring of debt that the euro zone does," said Lauren Rosborough, currency strategist at Westpac.

Hod
Advanced Member

United Kingdom
913 Posts

Posted - 27/05/2010 : 11:39:36

Euro weakens for 4th straight day and currently trading at 1.1870 !! against Sterling.

The euro's decline this week started with the Spanish
central bank's takeover of a savings bank “ CajaSur ” over the weekend,
which highlighted systemic risks in Spain's banking system.

Yesterday the euro took another dive lower on
speculation that a LARGE Spanish bank has been struggling to
roll over $1 billion in short-term funding in the U.S. commercial paper market.

This large Spanish bank would appear to be BBVA

See link http://www.ft.com/cms/s/0/2cbf897c-690f-11df-910b-00144feab49a.html

Points of interest: ( excluding normal EU, US and UK financial data ) that might have impact & influence on the Euro ?

SPAIN …

Markets will await any sign of an announcement on a labour reform seen as key to stimulating the Spanish economy.

An agreement between the Spanish government, unions and business groups is due by the end of this month !! May !!!!!

Parliament will vote on the government's proposal to cut 15 billion euros from the public deficit with a combination of pension freezes and public sector salary cuts.

Other Spanish / Euro news

Spanish Banks 27 May 2010

Bank of Spain proposes squeeze on bank real estate
* Central bank proposes more provisions against real estate
* Says new provisions could hit domestic profits by 10 pct
* Proposes banks should provision against bad debts sooner

The Bank of Spain intends to tighten rules on provisions Spanish banks have to make against real estate on their balance sheets, it said in a statement late Wednesday.
The central bank said these new requirements could result in an increase of 2 percent in provisioning Spanish banks had to make and could reduce pre-tax profits in their domestic business by an average of around 10 percent.
The proposed measures are another blow to Spain's network of unlisted savings banks, highly exposed to the country's property slump, which are undergoing a painful restructuring.

The Bank of Spain stepped in to take control of small savings bank CajaSur on Saturday after its planned merger with peer Unicaja failed.

Property developers owe Spanish banks more than 300 billion euros ($369 billion), the legacy of a decade of frenzied building during a boom, and refinancing of this debt through debt-for-asset swaps has loaded banks with unsold property portfolios.

Under the proposed measures, banks must put aside 10 percent of the property's value in provisions once it takes it onto its balance sheet. After 12 months it must put aside 20 percent and this increases to 30 percent after two years.

Banks would also have to provision for 100 percent of doubtful loans within one year of the debt turning bad rather than the maximum of six years currently.
Spain is suffering its worst recession in half a century, marked by high unemployment and groaning private debt levels after a housing and construction bubble burst.

Doubtful debts have increased more than six-fold over the past two years.

Hod
Advanced Member

United Kingdom
913 Posts

Posted - 28/05/2010 : 16:08:07

Sterling Euro currently trading at 1.1715

Euro strengthens ( against US$ & Sterling ) mainly on the comments / news that China assured investors it was not losing confidence in euro zone assets.

Snippets of Euro / Spanish news

Spanish austerity vote helps Euro
Spain's governing Socialists party won parliamentary approval for a 15 billion euro ($18.4 billion) austerity package by a SINGLE VOTE in an effort to cut its budget deficit and regain market confidence.

Fears that soaring Greek budget deficits and violent street protests could infect other euro zone countries sparked a sell-off that had pushed the euro currency to a nearly four-year low versus the U.S. dollar

Spanish labour reform talks going badly !!!

Talks with unions and business to overhaul Spain's rigid labour laws are going badly, a government spokesman said on Friday, casting doubt over reforms crucial for reassuring markets of the country's long-term solvency.
If unions and business can't agree by a looming end-of-May deadline, the government will push through changes to labour market laws unilaterally, the parliamentary spokesman for the governing Socialists, Jose Antonio Alonso, told radio.
Such a move would heighten the chances of industrial unrest as the country struggles to convince global capital markets that it is not heading for a repeat of the Greek crisis on a much larger scale. Such doubts have already lead investors to question the long-term survival of Europe's single currency.

Economists say cutting the cost of hiring and firing is vital if Spain is to regain competitiveness lost during years of relatively high inflation and achieve sustainable growth.
Unlike Greece, Spain's level of debt to gross domestic product, below 70 percent this, is not yet particularly problematic. But debt markets fear that without labour reform, unemployment, already at 20 percent, will stay high, pushing the government down the path of fiscal unsustainability.

thecrock
Advanced Member

United Kingdom
274 Posts

Posted - 01/06/2010 : 10:16:07

IS THIS THE END OF THE EURO?

The only option for Greece is both to exit the euro and to default.

The European authorities did well to cobble together a rescue package for the weaker European economies. However, no matter how much sticking plaster is applied, the fundamentals remain the same. A eurozonemember state can sort out its problems if it has a competitive problem but no debt problem or if it has a debt problem but no competitive problem.

Ireland for example has a budget deficit of around 12% of GDP now (down from 14% last year) but has had exports grow by 24% morethan its export markets since the euro was started on 1 Jan 1999. Ireland has also managed to cut domestic costs in such a way as to achieve an ‘internal devaluation’of probably around 10% which improves its competitiveness. As aresult, although domestic demand is likely to remain highly depressed as the fiscal adjustment takes place, the impact on the economy will be offset by export growth. As exports are already 176% of consumers expenditure, there is plenty of scope for growth driven by exports, even though domestic demand will be depressed as a result of the fiscal adjustment.

By comparison, Greece has cut its budget deficit from 13.6% of GDP last year to around 10% this year but the price is an internal recession that is causing tax revenues –never a strong percentage of GDP –to diminish further. But the crucial difference is in the external trade accounts. Greece has a competitive problem #8208;Greek exports have fallen by 25% relative to export markets since the euro started and are only 24% of household consumption. So there is no realistic scope forusing external demand to compensate for depressed domestic demand.

Getting out of the debt trap for Greece therefore looks virtually impossible without a devaluation. Yet if Greece leaves the euro, it must inevitably default. Leaving the euro would mean the new currency(new drachma?) will fall by a minimum of 15%. But as the national debt is valued in euro, this would raise the debt GDP ratio from its current 120% of GDP to 140% overnight. So part of the package ofleaving the euro must be at a minimum to convert the debt into the new domestic currency unilaterally.

This process is inevitable. The only question is the timing. The other issue is the extent of contagion. Spain would probably be forced to follow suit, and probably Portugal and Italy, though the Italian debt position is much less bad.

Report from the Centre for Economics and Business Research (cebr)

thecrock
Advanced Member

United Kingdom
274 Posts

Posted - 01/06/2010 : 10:38:29

Pound vs Euro

Last week was one of relative strength for Sterling as it rallied against the Euro from levels of 1.15 on Monday the 24th of May up to highs of 1.1872, last seen in June 2009 on Thursday afternoon.

Sterling’s strength did not come from its own strong economic fundamentals however, but more the dire straits that the euro zone finds itself in and a report from The Organization for Economic Cooperation and Development (OECD) which said that “due to the continuance of higher inflationary pressures within the UK the raising of Interest rates by the MPC towards the end of the year were
inevitable.” These two factors combined sent investors flooding back to the pound and soaring against its beleaguered neighbour.

Sterling’s Climb was however halted abruptly on Thursday, after news that UK consumer confidence fell for the third consecutive month in May, reflecting uncertainty ahead of the election result and the
prospect of fiscal tightening once a new government was in power.

This bad news was also coupled with a release from The State Administration for Foreign Exchange (SAFE) China's foreign exchange
regulator who deploys the nation's excess reserves. It denied through its website that it was reviewing its euro-area holdings saying, "Europe has been, and will be, one of the major markets for investing China's exchange reserves” This single statement and positive tone helped the euro to gain ground leaving behind its lows of earlier in the week.

With euro zone government debt worries outweighing concerns about the UK, one could expect to see further downside for the euro, at least in the near term. On Monday panic hit the currency markets and the Euro started to flounder as it came under renewed pressure.

This time instead of the pressure coming from the euro zone lead economy Germany, who the week before had undermined the Euro with its ban on short selling, This time renewed concerns about EU debt crisis continued to surface following comments on Monday from the IMF that the Spanish economy needs reform.

This comment came just as the rescue of Spanish bank Cajasur by the Bank of Spain sparked fears about the stability of Spanish Banks. Subsequently four Spanish banks have since announced plans to merge. These concerns have hampered the Euro and lead investors to seek "safe havens" for their money with the US Dollar being the big winner and the home of the majority of FX reserves worldwide.

To help combat the negativity surrounding the euro zone and its flagging currency Spain, Portugal and Italy as well as Greece have all released austerity measures (Where a government reduces its spending and/or increases fees and taxes to pay back its creditors) to try and stop the flow of Euro zone decay.

The continued weakness of the euro is a concern, with investors dumping the currency amid fears that debts will cause defaults by weaker countries in the European Union. The single currency has fallen in value by almost a fifth against the dollar in the last six months.

It is worth noting that Sterling is closely aligned with that of the single currency. Debt worries continue both in the UK and Europe, Austerity measures have been announced by both and with 54% of UK exports heading to Europe it is no wonder that the pound finds itself struggling against the Dollar whilst frequently undergoing abrupt shifts and reversals against the Euro.

Time will only tell but the continued economic weakness in both economies will halt the dramatic gains that many had hoped for during the summer months and instead will be replaced by a volatile and uncertain market.

Report from the Foremost Currency Group

Hod
Advanced Member

United Kingdom
913 Posts

Posted - 01/06/2010 : 11:56:48

Hi Crock, good post would like to add..

Sterling Euro trading at 1.1945 ! 1 ½ ? Year High, last at this price / level was on the1st December 2008

Spain “Downgraded” late Friday night ( by Fitch rating agency ) was expected and had little affect on the Euro,

However as mentioned in earlier post, Spanish Labour reform talks were going badly over the weekend.
Spain has extended the deadline for the talks, the deadline now extended to the end of June ! the talks have resumed once again.

I believe the longer the talks go on and if ? an agreement CAN’T be agreed , we could see further weakness of the euro.
If an agreement CAN be reached ( maybe this week ? ) euro could ? make some gains against the US$ and also Sterling.

Ongoing concerns about bad loans held by Euro Zone Banks also keeping the Euro weak, mainly against the US$.

My thoughts - NOT advise: Euro AGAINST the US$ !!

It is worth noting that the Euro is VERY weak against the US$ currently trading at 1.2110 US$ to the Euro.

The level of 1.2100 ( US$ to Euro ) is very important price level ( on a chart. )
If this level is broken ( below 1.2100 ) we could see the euro rapidly weaken against the US$ and test / break through 1.2000 maybe down to 1.1650 ?

1.2100 US$ to the euro was last at this level in April 2006 !!

However the FX market / Financial institutions are “INCREDIBLY short of Euros ” ( = sold HUGE amounts of Euros vs US$ ) and just the “slightest whiff ” of any positive news coming out of Europe should see the euro being bought against the US$

We are in for some LARGE and volatile moves !

Hod
Advanced Member

United Kingdom
913 Posts

Posted - 01/06/2010 : 20:06:32

Interbank Spot Sterling Euro traded very briefly at 1.2010 currently trading at 1.1960

Bert
Advanced Member

United Kingdom
159 Posts

Posted - 02/06/2010 : 08:38:59

The climb in sterling continues - euro spot up at 1.2065 in early morning trading. Makes life that little bit less uncomfortable for those of us with outstanding stage payments. Will it last? I guess Hod and The Crock will provide the answers!

WorWilly
Advanced Member

United Kingdom
2786 Posts

Posted - 02/06/2010 : 10:52:41

May be good news as you say for those with stage payments to make, but every climb brings you property price down, in pounds that is. So good news for anyone waiting to buy, too.

peter c
Advanced Member

United Kingdom
838 Posts

Posted - 02/06/2010 : 11:10:12

Is the Euro doomed?
Surely with the rescue of Greece this gives the green light for other economies to do as they wish with the knowledge that the rest of eurozone will bail them out because they do not want failure of any member states?
I know very little about this, but it seems that if failure is not allowed, then decisions are being made with no negative consequences. This in the long term must lead to failure.

WorWilly
Advanced Member

United Kingdom
2786 Posts

Posted - 02/06/2010 : 12:09:16

The lad I work with Peter is Greek, his parents who still live on the mainland who have just retired, get a pension of 250 euros a week for them, they are laughing all the way to the Bank as they were expecting a pension of 160 euros like their neighbours before them. They were expecting this to be cut with the crisis but have had a letter saying it stays.

Is it just the UK who get walked all over ? as the old mans pension forecast has gone from 50K a year to 20K ??? and he was told he's lucky because one fund was a secured one.

Yet the Czech who live in the block opposite allowed here to work at the age of 57, will get a full state pension ??? They work part time so are entitled to all the benefits going, get rent and council tax paid, then retire with their pension and have said they'll then go back home.

You ask if the euro is doomed, I ask is the UK doomed too.

ontoyou
Advanced Member

United Kingdom
554 Posts

Posted - 02/06/2010 : 12:18:01

don't agree that it brings the sterling price of the properties down.

- if i'm a seller i know you are getting a better exchange rate so i can put the euro price up.

- if i'm a seller i might just wait for sterling to weaken again. therefore less properties will go on the market.
less supply means prices go up.

- also if i'm converting sterling to euros for my monthly mortgage payment it just got a whole lot easier for me. i therefore have less need to sell as do others and so less properties will go on the market.
less supply means prices go up.

- as has been said, it's now easier for those with stage payments still to make. they are therefore more likely to complete. again, fewer properties will be on the market ..... you know the drill.

all other things being equal a fall in the value of the currency of a country will lead to higher property prices in that country. this is because of increased demand from overseas purchasers who now have more purchasing power than before.

it's not such good news for the money back brigade who will be converting euros to sterling.

Hod
Advanced Member

United Kingdom
913 Posts

Posted - 02/06/2010 : 13:18:20

Maybe worth making a note:

Spain’s government will present Labour Reform on Wednesday 16th June “ with or without deal".

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