Written By Kingsley Walker
GBP Gains Against USD and EUR
Barclays posted a 25% increase in half year profits yesterday to the value of £3.1bn, however, set aside a further £850 million for customer compensation. Considering the recent run of bad press many were surprised by the figures. Sterling gave us the second surprise of the day after it began to climb against both the Euro and Dollar amid no obvious eco-stats of note or significant news releases. GBP/EUR began the day in the low 1.41’s before climbing above 1.42, with only mortgage approvals improving on forecasts by 1k not enough to warrant the gains in sterling. As my colleague James Baxter wrote in his report yesterday, with speculation intensifying surrounding an interest rate rise after GDP figures met forecasts, the markets may have begun to start pricing in a rate rise.
The European Central Bank said on Wednesday that the Eurozone’s founding members have diverged economically, a disappointing outcome that goes against the premise that a common currency would let poorer countries catch up. A statement released said, “Progress towards real convergence among the 12 countries that formed the euro area in its initial years has been disappointing.” The ECB continued by arguing that the early adopters of the euro clung on to their poor institutional frameworks which has left them vulnerable to shocks. Much like the situation currently playing out in Greece whereby the income gap has increased since adopting the euro.
The markets continue to be a volatile place and as such it may be worth securing a forward contract whilst the rate is still sitting above a seven year high. The forward contract will protect you against any market fluctuations and will allow you to effectively budget for your property purchase. By placing a 10% margin of the overall value you can rest assured that you have secured your currency.
Get in touch with the Foremost Currency Group to discuss this contract further.
Today’s data releases
With nothing from the UK today the focus will shift to the Eurozone and the US, flash CPI and GDP figures are released from Spain followed by a German unemployment change. Over in the US advanced GDP figures, unemployment claims, and goods trade balance figures are released all expected to improve on previous readings.
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