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EUR pound falls in trading
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Saturday, 14 March 2009 |
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After remaining fairly steady during February, the pound fell in trading on Monday, dropping below €1.10 for the first time since January, when we approached parity.
The reason for the drop is yet more bad news for the UK economy – the government has bailed out the Lloyds Banking Group - new l
ending from Lloyds will jump to £28bn in the next two years, dwarfing similar figures from Northern Rock and RBS. This caused a big fall in banking shares, and dragged the Pound down. "What's going on in UK shares at the moment is putting pressure on Sterling," said Geraldine Concagh, an economist at AIB Group Treasury.
Also last week we saw the Bank of England cut interest rates to a new record low, and announce that £75 billion of ‘new money’ will be ‘created’ through Quantitative Easing – this is likely to continue to put further downward pressure on Sterling.
If this wasn’t enough, forecasts from the IMF show the UK economy is set to shrink at a much faster level than the EU economy:
As the chart illustrates, the outlook for economic growth makes grim reading. It shows that according to the IMF, the UK sets to be the worse performing nation amongst world economies, with forecasts showing a 3% decline in GDP.
Due to these weak forecasts for the UK compared to the EU, the Pound is likely to remain weaker than the Euro for some time, and exchange rates for GBPEUR may well continue to drop towards, and possibly below, parity.
Good News
Some good news amid the gloom and doom - a court decision in Spain has opened the way for thousands of UK citizens to reclaim some of the tax they paid when they sold their homes there. The High Court in the region of Valencia has ruled in favour of a British couple, Mr and Mrs Roy.
It told the Spanish tax authorities to repay them for being charged a capital gains tax levied at 35% instead of 15%. A spokesman for the Roys' law firm said it was gathering similar cases, with an average claim worth £14,100.
With the refunds being paid in Euros, and with the Pound so much weaker now than in recent years, its a great time to convert this back to Sterling - if you are one of the lucky expats who are expecting funds to be returned to you, do get in touch with Foremost Currency Group and make sure you achieve the best possible exchange rate.
If you have a requirement to purchase Euros with Sterling however, consider acting sooner rather than later to protect yourself from falling rates. Even if you don’t need your currency for some time, you can lock in today’s exchange rates with only a 10% deposit using a Forward Contract, thereby protecting yourself against any further decline in exchange rates.
Data of note this week:
For the UK we have House Price Data, Industrial and Manufacturing Production and Trade Balance data, all of which may cause volatility in GBPEUR exchange rates. Also watch out for the European Central Bank monthly report, which gives an insight into the EU economic climate.
For more information on how these data releases can affect your currency purchase, contact one of our dedicated Account Executives today.
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