Euros to Pound
Le plus ce change... on the first of April the Pound changed hands at (among other levels) €1.27. It did so again on the first of May, June, July and, yes, the first of August. A pattern is beginning to emerge! We discussed last month the déjà vu aspect of what Sterling is not doing.
Exchange rate comparison
Let's do it again: Sterling/Euro has gone nowhere in July, just as it went nowhere in April, May and June. For four months it has been stranded between €1.24 and €1.28 with only the rarest signs that it wants to go anywhere else. Its average daily price in May was €1.2628, in June €1.2621 and in July €1.2623. |
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Stability for Sterling and Euro?
It is not unknown for Sterling/Euro to exhibit such stability. The last time it happened was during the phoney crisis last summer when the Pound clung to a four cent range between €1.46 and €1.50 between March and September. Mind you, the range during the next six months was rather more spectacular; €1.48 to €1.24. Happily, the current lack of direction is unlikely to be followed by a similar rout.
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Inflation up, credit much harder to get
After many months of being the only economic untouchables in town, the US Dollar and the British Pound have got company. Almost everywhere in the developed world, the indicators are turning red. High oil and food prices are decimating disposable income and pushing up inflation. After several years of boom, property prices are correcting. The knock-on effects of America's sub-prime mortgage fiasco show no signs of coming to an end and credit is much harder to come by for most people.
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Euro zone slow to show economic signs
The economic signs did not appear in the Euro zone as quickly as in Britain, but they are appearing now and the natives are uneasy about it. At the end of July, figures from the European Commission showed a plunge in consumer confidence and industry leaders were also more pessimistic.
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Economic problems faced by all
This is not to say that things are any better in Britain. According to the GfK/NOP survey, which began more than 30 years ago, consumer confidence has never been lower. Nationwide reported the biggest ever annual fall in its house prices. The difference now is that the same story is coming from every direction. For Sterling it is a case of a problem shared being a problem halved. It has already taken its beating, now it is somebody else's turn.
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EDF and British Energy
We are not talking bright new dawns here. The Pound displayed its vulnerability on the first day of the month when French generator EDF pulled out of its bid for British Energy. Had it gone through, the deal would have involved buying a sizable chunk of Sterling/Euro. Its cancellation removed somewhere between £5-10 billion of potential support and cost the Pound an immediate half cent against the Euro.
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Euro's turn to suffer?
Such occasional setbacks are only to be expected, what matters is how many other guys suffer. A year ago all the bad news surrounded Sterling. Now the Euro is taking its turn. Investors don't like Sterling any better but they are less fond of the Euro. It could work in the Pound's favour.
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Buying Euros
It could, but it is not happening yet. Therefore, for a third month, the advice remains unchanged. If you are planning a property purchase in France this summer, the only way to be sure how much it will cost in terms of Sterling is to arrange to buy the Euros now. (Currency exchange options which save you money.) Put down a percentage deposit, pick an appropriate date to settle the transaction, maybe a few months ahead, and agree an exchange rate. It will not be the best Sterling/Euro exchange rate you have ever seen but at least it won't be the worst (Currency Exchange - Buying Euros at the Best Rates - Your FAQs).
Additional articles which may be of interest:
Advantages of using a currency broker or foreign exchange specialist
Feedback on currency brokers or foreign exchange dealers
Glossary of terms used in currency exchange
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About the author
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