The currency blog

Following a mauling in the European elections and a flurry of resignations and shouts for his resignation..Gordon Brown lives to fight another day! In a meeting with over 400 MPs he secured enough backing to push on. Sterling has reacted positively and is pushing higher across the markets including the USD and EUR as fears and uncertainty in the market are quelled…for now anyway. Sterling was also boosted by further improvements in UK housing data- a survey by the Royal Institution of Chartered Surveyors showed house prices falling at their slowest pace since November 2007. Speculation is also helping sterling through positive M & A flows on the proposed sale of Barclays fund business in cash and stock to Blackrock Inc in the USA. Also in the UK we saw retail sales data fall 0.8% in May following the 4.6% rise in April- this dip adds a small dose of reality to recent improved confidence- it seems we are seeing optimism going forward but we are not going to push the boat out just yet! Cable is now targeting 1.6150 and then 1.62 on the upside levels, with 1.60 still a key pyscholigical support.

The euro has come under pressure following a dressing down by the IMF. The IMF highlighted their weak financial system and lack of a co-ordinated and aggressive plan for the euro-zone banks could deflect their drive for recovery. The IMF said “a key missing element is a proactive strategy to deal with a weakened financial system.”, interestingly ECB members Stark and Weber’s comments sharply contrasted that of the IMF as they noted the fact that price risks are on the upside and recent easing and stimulus may need to be reversed very quickly…stubborn or good policy –time will tell. The worry on banking issues especially in eastern Europe could seriously hamper the euro going forward. GBP/EUR has bounced back to 1.1570 and looks bullish this morning.

Over to the US and risk sentiment was helped by reports that the US Treasury will announce today that 10 US banks are to repay TARP- essentially paying back government shares. This has helped boost risk and this has eased the USD lower for now- we mentioned yesterday that better economic data on Friday actually helped strengthen the USD but this has not followed through as yet today.

The USD continues to fightback this morning making further gains against the pound and euro. Cable is down to the low 1.58’s after kicking off at 1.5930- the USD is seeing across the board strength and sterling is weak in it’s own right. The Dollar is rallying following a positive move after the better than expected US jobs data on Friday- US non-farm payrolls fell by 345,000 in May over a forecast for a 520,000 drop. Interestingly the market is now turning to buying the dollar on the improved data- previously the USD was sold on better data as risk appetite increased causing a flow out of dollars into higher yielding currencies. This is significant as it shows that confidence is creeping back into the US economy even in the light of long term concerns on the health of the US economy. Sterling continues to slide following rumours of Gordon Brown’s resignation on Thursday sweeping the markets- the speculation was quickly denied but the damage had already been done. The pound remains under pressure as expected dismal European election results fed through heaping more pressure on Brown and heightening the uncertainty on his tenure. It is a well known trend that political uncertainty will weaken a currency- the fact that this uncertainty is arising amid an economic crisis and extremely volatile and fragile markets magnified the moves in sterling.

The pound was not helped when former Bank Of England member David Blanchflower stated that the Bank may expand and widen its Quantitative Easing programme. Last week the BoE did not move further on their QE programme and maintained the level at 125 billion pounds. The central bank has the authority to expand to 150 billion and ask permission for more if required, Blanchflower feels that the current level of QE will not bring inflation back to target and therefore assumes that there will be more to come. The introduction of the QE programme and the subsequent expansion of it in May has been historically sterling negative, therefore further discussion and action on this is presumed to be sterling negative.

Elsewhere concerns were again raised over the health of the Baltic states as Latvia raised its deficit projections and a government bond auction failed. This led to losses in the Swedish krona and the euro which are both exposed to the region. The stability of the Baltic states has been mentioned previously and any worsening of the situation could impact on the euro further.

June 5, 2009

Sterling had the equivalent of a Bad Hair Day yesterday on the foreign exchange market. Even though we had been expecting Sterling to ease during the day and overnight, the magnitude of the drop was quite surprising. Several factors compounded the situation, culminating in an early afternoon rumor that Gordon Brown had resigned. Ongoing technical now look for a test of the strong Sterling support zone between 1.5800 and 1.5500.

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The sun is out and summer is officially here now that it’s June! Just where has the year gone! The month of May had 5 Dress Down Fridays, 2 Sweeps and we introduced the Wii to the office. All donations have been counted and I am now in a position to reveal that the Currencies Direct Head Office co-operative wall new total is – really big drum roll……..

How amazing is that. I am so proud. We started this process in March, as a way to raise regular amounts for different charities and to get the whole office involved with activities. Knowing the generous spirit of the people that work for Currencies Direct I had high hopes that the scheme would be successful, but I never imagined that we would break the £1000 mark in just 3 months. WELL DONE TO EVERYONE THAT HAS DONATED! Read the rest of this entry »

Ok. You’ve made it. You’ve found the place to live, taken the plunge and have either moved to Spain or bought a holiday home. It’s likely that one of the first things that you will find yourself needing to arrange is the ability to communicate with your friends and relatives back home. Most likely, you’ll be wanting a broadband Internet connection and a phone line.

So, what are your options then? Actually, plenty. Nowadays Spain has a pretty decent telecommunications infrastructure and the bad old days where the time it took for a telephone line to be installed was measured in years rather than days is long gone.

ADSL Broadband in Spain

Mostly, if you are going to be living here full time it makes sense to get a phone line and have a broadband ADSL connection installed. There are various providers, Telefonica which is the company which “owns” the phone lines, Jazztel, Ya.com and many others. Generally, you’ll be paying around 13 euros per month for the phone line and around a further 30-40 euros per month for your broadband ADSL package.

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We continue on the bull-run for sterling as PMI data emphasises a rise to 51.7 in May from 48.7 in April, over the 50 level identifies that the sentiment is positive for the UK activity. Sterling rallied on the news this morning and tested new yearly highs against the US dollar and the euro. The improvement in PMI levels was mirrored in the eurozone as composite PMI, a gauge of private sector activity rose to 44.0 from 41.1 in April. This data lends further weight to shouts of a recovery to commence by the end of this year for the UK and an indication that the worst is behind the eurozone. More positives came in the form of UK consumer confidence data released by the Nationwide Building society which strengthened in May as more optimism is foreseen in the next 6 months in the economy and the jobs market.

Tomorrow we will get the announcements from the Bank Of England and ECB on interest rates. It is not anticipated that we will see any movement from the UK on interest rates and it is unlikely that we will see additional measures for QE – although that was the thought process last month too! For the ECB Trichet said ‘We expect to engage in a programme of around 60 billion euros that targets an important segment of the private securities market which has been particularly affected by financial market turbulence’. This in theory should weaken the euro and help sterling gain further, however given that lots of good news has already permeated sterling we could be in line for some profit taking….watch this space!

Later we have testimony from Ben Bernanke on current economic conditions and the federal budget. It will be interesting to see if attention is turned to the recent fall in the US dollar and the long term factors that are driving this weakness- in particular the fiscal health and 10 year budget projections amid ever increasing debt levels.