Currecy Movements - Update

We have many clients who about to complete on properties and a number who are watching markets very closely for more signs of sterling strength to optimise their foreign currency payment timings.

Well, I have some more encouraging news in the report below from International FX. You will see regular blog reports on currency on this blog. Currency and property investment are intertwined and clearly affordability of property can be changed either way with currency movements. Please see previous posts on some comment on about how to take advantage of.

Also check out offers here and on www.jet2letproperty.com that are in UK Pounds, if that is your main currency. If you have euros or dollars or other currencies then currency can be still relevant as you need to consider what currency to take any mortgage out on.

So here is yesterdays currency report from our sponsors, International FX

USD

The dollar remained firm against the Euro as speculation mounts that the Federal Reserve may soon pause from cutting interest rates while the European Central Bank is more widely expected to begin trimming borrowing costs in the coming months. Markets anticipate the Fed will cut interest rates by a quarter point next week but expectations are building that it could then refrain from any further cuts. Data out this afternoon showing US new homes sales plummeted 8.5 percent did little to unseat this view and the dollar remained firm. Ashraf Laidi, currency strategist at CMC Markets, said any signal from the Fed next week that the cycle of rate cuts could herald the start of a significant recovery for the US currency. “In the event that the FOMC shows any sign of reducing its easing policy, then currency markets will obtain the necessary green light to accelerate the buying in the dollar,” he said. The number of U.S. workers filing new claims for unemployment benefits fell unexpectedly last week, a government report said Thursday. Initial claims for jobless benefits decreased by 33,000 to 342,000, the Labor Department said.

Economists surveyed by Dow Jones Newswires had expected a climb of 3,000 new claims which in turn boosted the dollars strength. Even the four-week average of new claims, which economists use to smooth out volatility in the weekly numbers, decreased last week by 7,250 to 369,500 from 376,750. Still, concerns about a weak labor market persist in wake of a recent Labor Department report that showed jobs in March suffered the biggest decline in five years. A healthy job market is key to a healthy economy, but turmoil in financial markets triggered by problems in the mortgage market threaten to push the economy into recession mode.

Euro

By contrast, expectations have built today that the European Central Bank will be forced to cut interest rates in the coming months following a much weaker than expected German business survey. The Ifo research institute said its April business climate index for Germany fell to 102.4 from 104.8 in March, well below analysts’ forecasts of a decline to 104.3. In recent months economists have been surprised at the strength of Ifo surveys, providing support to the idea that the Euro zone economy has out witted the US and will weather the credit crunch relatively unscathed.

However today’s data and yesterday’s weak Euro zone manufacturing PMI survey mean many analysts are now questioning this idea, boosting expectations the European Central Bank will be forced to cut interest rates in the coming months. “The Ifo figures out of Germany this morning look very weak which would stem inflation concerns slightly and may give room for the ECB to cut rates,” said Mic Mills, a trader at TradIndex.com Sterling Sterling rose against the Euro but fell against the dollar on Thursday as contrasting data from the UK economy gave investors mixed signals on prospects for interest rate cuts. Bank of England policymaker Andrew Sentance said the pound was likely to remain weak for some time and expectations of further interest rate cuts were driving sterling lower.

The pound got a brief lift on Wednesday when it emerged that Sentance and fellow BoE policymaker Tim Besley voted to keep rates on hold this month, but it came under renewed pressure as investors still expect rates to fall. Investors will eye UK GDP data that is out today for more clues on the health of the UK economy.

Euro / Dollar / Pound - update

Thanks to Richard at International IFX for this useful currency report:

With the Bank of England’s mortgage lenders rescue plan being the talk of the markets at the moment we have seen Sterling see-saw against the major currencies over the last week; in particular yesterday where we saw recovery in the second half of the session against the dollar.

Against the dollar, sterling fell just short of a new two week high. Nearer home versus the euro, sterling managed to fight its way back from above an all time low.

The Bank of England’s initiative to lend major mortgage lenders 50 billion pounds is aimed at kick starting new mortgage applications and stemming off repossessions. This effectively (for the time being) allows the MPC to look at interest rates solely to control inflation and keeping the economy afloat without having to get too involved in the housing market, a recent thorn in the side of the UK financial system.

Initially this was not seen as a positive move, however late yesterday traders began to see this as a more positive move for sterling following comments from Tim Besley regarding the UK housing market. Since December we have seen reductions of 75 basis points and there has been widespread speculation that the MPC would have to reduce rates further and more aggressively harming the currency’s yield appeal. However, without having to factor the housing market into the decisions, and with inflation above the target of 2 percent it is unlikely we will see dramatic interest rate cuts like those by the Federal Reserve in the US.

Sterling’s recovery versus the dollar could also be off the back of a euro/dollar rally which took the euro to another a new high as particularly positive comments from the European Central Bank boosted the single currency.

Traders said they saw strong demand for the euro after Yves Mersch, a member of the ECB’s governing council, said the central bank might revise its inflation target upwards and was surprised some analysts thought the ECB were considering future interest rate cuts.

One such analyst, Hans Redeker, at BNP Paribas, said he had adjusted his currency forecasts accordingly after seeing increasing signs that the ECB was flirting with the idea of raising rates

Later today we will see the release of the minutes of the BoE’s interest rate decision meeting earlier this month. It’s a fairly straightforward way to see how feelings lie with the bank’s nine policy makers. Markets will wait to see if the decision was a unanimous 9-0 decision to reduce rates or more divided vote, with some members preferring not to cut. The outcome may give some hints as to when the next rate cut, if any for the time being, will happen