Trading details late March

Last week's trading saw the following currency movements:
Currency Pairs Weeks Movement
£ / USD + 0.6 %
£ / EUR - 1.7 %
£ / CAD - 0.1 %
£ / NZD + 0.1 %
£ / AUD - 0.9 %
£ / ZAR - 0.1 %

Friday 28th March trading
The pound slid to an all time low against the Euro and lost ground to the dollar on Friday. This was a result of unfavourable house price and consumer confidence data releases, which point to a slow down in the UK economy.

According to data from Nationwide, one of the UK’s largest mortgage providers, house prices fell in March for the fifth consecutive month. This brings the annual increase in house prices to its lowest in 12 years, a clear indication that the economy is wavering. To compound things further according to a Gfk NOP survey, British consumer morale fell to its lowest level in over 15 years, with households feeling gloomier about future economic conditions than at anytime since the downturn of early 1990s.

Review of the weeks trading
The pound managed a 0.6% rise against the dollar last week following negative economic data from the US including a surprise drop in retail sales and continued sliding consumer confidence. Following a week of positive news for the Euro and negative news for sterling, the pound fell 1.7% against the single currency.

Good news from Europe…
Buoyant news from the French and German economies, with business sentiment and confidence data exceeding expectations, prompted bullish comments from Jean-Claude Trichet, ECB Bank President. He reiterated the banks commitment to contain inflationary pressures, reducing further any expectations of a near term cut in euro-zone interest rates.
Analysts believe such news reinforces the view that the economy in the euro-zone will remain relatively resilient despite the looming shadow of the credit crunch.

Bad news from the UK…
Such news from Europe is in stark contrast to reports from the UK. News of a worsening economic backdrop of faltering house prices and falling consumer confidence hardly helped earlier dovish comments from the Bank of England which suggested it was ready to cut interest rates to help resolve liquidity problems in the financial system.

A cut in interest rates makes sterling less attractive to investors, which in turn reduces demand and therefore reduces the value of sterling. If sterling was to continue to fall at the rate it did last week against the Euro that would equate to a 6.8% loss over the next month. A foreign property costing £100,000 would therefore cost an extra £6,800 in just one month. Considering this downward trend in the value of sterling, it may be worth securing your currency sooner rather than later to avoid any further expense.

The Week Ahead
Unfortunately there is not a great deal of good news expected from the UK this week. Releases to look out for this week are as follows:

Monday 31st March

• In the Euro-zone, Consumer Price Index and Consumer Confidence releases are scheduled at 09:00 GMT. These events may generate some deal of volatility for the Euro

.• In the UK, Consumer confidence data is to be released, this could have a negative effect on the value of sterling if, as expected, confidence has dipped. This would provide further evidence of the UK’s slowing economy.

• In the US, the Chicago PMI (Purchasing Managers' Index) a measure of factory health in the upper Midwest. A release lower than the previous 44.5 may strengthen the view that the US economy is on the verge of or already undergoing a mild recession.

Tuesday 1st April

• In Australia, the RBA Interest Rate Decision is released at 03:30 GMT, currently 7.25%. A rise would be likely to increase the cost of the AUD against sterling while a cut would tend to reduce AUD values.

• In the Euro-zone manufacturing PMI (previous 52.0) and Unemployment Rate (previous 7.1%) are released at 08:00 GMT and at 09:00 GMT respectively. These are important events to monitor as positive results may lead to further strengthening of the Euro.
Wednesday 2nd April

• In the UK, Mortgage Approvals data is scheduled for release at 08:30 GMT. A fall in the number of approvals could have a negative effect on sterling, as it will add to uncertainties over the UK economy.

With little positive news expected for sterling this week and the accumulation of previous negative data releases, expectations are strengthening that interest rates could be cut by the bank of England as soon as next month. “More people are falling into line and expecting an early cut from the bank of England”, said Chris Turner, head of FX at ING. He continued “we’re seeing the biggest slowdown in the UK since 1992-93, so the pound is set to fall further.”
The good news for people looking to purchase a property abroad is that you can secure a forward contract on your currency to alleviate the risk of any further falls in the value of sterling. This will Guarantee you a rate no matter how far the pound may fall against the Euro, providing piece of mind that future currency movements will not have a negative affect on your finances. Why not give your account manager a call today to discuss the options available to you?
And Finallyinally…Despite the gloomy outlook in the UK property market, house prices in France are up 4% year on year and in Germany they have risen by 2 % according to data from Assetz. So if you are thinking of buying a dream home abroad or want to invest in a rising market, why not have a look at www.propertyline.co.uk one of the UK’s fastest growing overseas property portals.