Buying Euros - advice for French property buyers remains unchanged
For more than a handful of months the argument here is that investors planning to buy property in France or anywhere in the Euro zone should hedge their exposure. They should arrange, ahead of time, to buy half the Euros they need using a forward transaction. (Currency exchange options which save you money.) The logic, all along, has been that in the absence of a downward direction for Sterling/Euro there is no reason to buy all the Euros up-front: the Pound might go up. In the same way, there is no justification for delaying the purchase of Euros until the last minute in the hope of a serious Sterling rally; there has been no sign of one. (Currency Exchange - Buying Euros at the Best Rates - Your FAQs.) For yet another month that advice remains unchanged.
Exchange rate comparison
In September and October global exchange rates went through their most volatile period ever. Daily swings of three or four percent were unremarkable and percentage moves occasionally ran into double figures. On one memorable (and scary) day the Pound fell three and a half per cent against the Euro before turning on its heel to rally above its starting point and then fall again. Price action like this is a huge discouragement to the market makers who normally provide the liquidity that keeps markets steady. |
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Traders keep their heads down
Traders, however skilled and experienced, are like any other people; they don't want to get run over so they keep their heads down. Their absence - the absence of the prices they usually quote - aggravates the volatility. Commercially-driven buyers need to buy currency; sellers need to sell. Sometimes they must do it whatever the price. If they can't do it at one level they will trade at the next. And if that means chasing Sterling/Euro through three cents, so be it.
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Euros to Pound
And, after all the muck and bullets, Sterling ended October at €1.2620. Its six month daily moving average was at exactly the same level. With blood on the street all around it is almost spooky how the Pound and the Euro have clung to each other through the mayhem. The US Dollar and the Yen have shot higher and the Aussie Dollar has fallen off a cliff but Sterling/Euro soldiers on, content with its lot somewhere around €1.26.
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Sterling and Euro sticking together?
As they say in all the best unit trust prospectuses, "past performance is no guide to future performance." That is indeed the case for currencies, especially in today's turbulent conditions. Most of them have gone crashing off into the forest in one direction or another in the last few weeks. But Sterling/Euro is sticking to the well-trodden path. With no reason to call it otherwise, the only reasonable projection is to look for more of the same.
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What lies in store?
Yes, it might suddenly all go horribly pear-shaped for Spanish banks or the Italian budget or Slovenian pension funds. The Euro could find itself under unforeseen pressure. But it is equally possible that something could go wrong with Britain's economy; something that nobody had anticipated. Goodness knows, we've had enough surprises in the last few months to make us expect the unexpected.
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Sterling and Euro relatively stable
So we're back to square one. The relative stability of Sterling/Euro at a time of immense market pressures suggests that things will carry on as they have for the last several months. To put that another way; if things don't change they'll stay the way they are.
Additional articles which may be of interest:
Advantages of using a currency broker or foreign exchange specialist
Glossary of terms used in currency exchange
Feedback on currency brokers or foreign exchange dealers
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About the author
The information in this article has been supplied by the currency broker Moneycorp. For further advice on currency exchange and money markets, call Moneycorp today on +44 (0)20 7589 3000. Alternatively go to www.moneycorp.com where you can open a free, no obligation Trading Facility. Make your money go further!
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