The currency blog

Sterling and the Euro have been dancing between the 1.1650 - 1.1950 range for the better part of the last fortnight. Compared with the splurge of information released at the beginning of both May and June, July has seen an evenly weighted battle between these two currencies; UK growth has kept euro under pressure, and the most recent stress tests for European financial institutions have brought inconsistent sentiment to the market. We don’t really know what stresses we tried on Europe’s banks, or the criteria by which a bank might pass or fail. City pundits have suggested that the stress tests themselves are a hollow exercise that serve only to suggest that the Eurozone is prepared to address reckless risk taking; but what is being testing? Have these steps gone far enough, and what will happen to those banks who are primed to reveal losses and liabilities later in the year but meet the requirements of these tests at the moment?
These questions are just some of those which have undermined confidence in the euro over the past week to ten days. The decision rests with investors and traders, and after Europe and London’s closes on Friday 23rd sterling was seen to improve taking its high for the day up to 1.2019.
Monday will be interesting. Politically and economically the UK can adopt the high ground as our GDP figures do show some positive signs, and our austerity measures have been applauded globally; however the market is fickle, and over the next two weeks we will have to weather attacks from European regulators, speeches from the BoE’s Govenor and housing figures that may reveal just how averse to risk high street lenders have become…

Sterling has done its best to hold form above the 1.18 level before Friday’s close, but the slide from 1.20 over the last 12 hours is symptomatic of a market uncertain about the worth of imminent stress tests, and the long term implications of European regulatory changes such as the Alternative Investment Fund Management directive.
Germany and France have adopted something of a ‘dog in the manger’ attitude, and seem willing to risk the movement of key fund and asset management services to the Far East in order to provide a more even European playing field. Measures like the AIFMD will have a negative effect on European and London based trading, and wealthy tax payers will leave the EEA and UK for softer structures off shore in countries like Singapore and Hong Kong.
Key figures in the banking sector have firmly stated that the upcoming ‘stress tests’ will not, if weathered, signify a clean bill or health; and issues such a deflation, high levels of government debt and a spike in investment interest rates because of said sovereign liabilities still plague the markets and undermine confidence.
Sterling has settled to the 1.18 level, and this was to be expected after such a frantic rally following the May election and the Budget in June. 1.20 is still achievable, but with luke warm economic data it will be difficult for us to find support above this key level in the coming weeks.

The Harrogate show hosted with French Property News traditionally brings a varied selection of period and new build properties under one roof and affords both buyers and sellers the chance to meet experts in the fields of relocation, currency, taxation and property…this year did not disappoint. Read the rest of this entry »

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