Where is the Euro going in the new year?
Discussion
I've just sold some investments in Euroland and curently a reasonable sum is sitting in my Euro currency account. I have 4 weeks to decide what to do with it, my gut says get it into sterling pronto, i.e. before serious trading starts in the new year but then with the fluctuations over the last few weeks do I hold on and see what happens in the new year?
Thoughts and opinions would be gratefully received!
Thoughts and opinions would be gratefully received!
If that is how you think currencies behave then you better not invest.
They are mainly driven by interest rate differentials, and not by 'the state of the economy'.
When the first signs of European issues started to arise in Early 2010, and even after Greece, Ireland and Portugal had requested bailouts, the EUR reached 2 year highs against both the USD and GBP.
Taking risks with FX is one of the quickest way to see your money pulverised, so my humble opinion is to consider what your time horizon is, and if your directional bet goes wrong, can you wait 5-10 years in order to break even again (if ever).
If you are living in GBP, and your recently matures investments are in EUR, with the 2 year trading range 1.10-1.20, you are at about set in order to repatriate your capital (currently 1.20).
You could wait for a short rally, but it's better not to get burnt.
On the flip side, I can see the UK losing it's AAA rating shortly(1-2 years), as there is no sign that unemployment is curbing, and the budget deficit is one of the worst in Europe.
I had a quick look on my Bloomberg terminal, and the forward implied FX has it flat at 1.20, as do the bank contributed forecasts.
Hope this helps
They are mainly driven by interest rate differentials, and not by 'the state of the economy'.
When the first signs of European issues started to arise in Early 2010, and even after Greece, Ireland and Portugal had requested bailouts, the EUR reached 2 year highs against both the USD and GBP.
Taking risks with FX is one of the quickest way to see your money pulverised, so my humble opinion is to consider what your time horizon is, and if your directional bet goes wrong, can you wait 5-10 years in order to break even again (if ever).
If you are living in GBP, and your recently matures investments are in EUR, with the 2 year trading range 1.10-1.20, you are at about set in order to repatriate your capital (currently 1.20).
You could wait for a short rally, but it's better not to get burnt.
On the flip side, I can see the UK losing it's AAA rating shortly(1-2 years), as there is no sign that unemployment is curbing, and the budget deficit is one of the worst in Europe.
I had a quick look on my Bloomberg terminal, and the forward implied FX has it flat at 1.20, as do the bank contributed forecasts.
Hope this helps
tinoproductions said:
I had a quick look on my Bloomberg terminal, and the forward implied FX has it flat at 1.20....
The forward FX rates have no predictive value of course, they just reflect the fact that interest rates are at a similar level in the UK and Euroland.I agree that FX rates are very hard to forecast and if your costs are in Sterling, then I would switch into Sterling quite soon.
Steven Quas
Hamburg
Edited by Steven Quas on Saturday 16th March 14:53
Steven Quas said:
The forward FX rates have no predictive value of course, they just reflect the fact that interest rates are at a similar level in the UK and Euroland.
Indeed Steven, and as there is no differential, there is no directionality implied by holding, for whatever maturity.Cheers for the posts guys. I was watching the markets last week and noticed the euro start to weaken and the trend was to continue to do so. So I decided to move the lot into sterling - I've got a UK tax bill to pay and wouldn't get a great deal if I moved it across in dribs and drabs.
For those interested I used Hargreaves Lansdown currency account and on a mid market of 1.1929 I secured 1.1969, not brilliant considering the euro was sitting at 1.16 not a coupe of months ago. My gut feeling is that things are going to get worse (i.e. euro weaker) leading up to March when the union is supposed to pass the new legislation, then if the ECB starts to seriously consider QE then the currency will further weaken and finally the eurozone might see benefits in a weak euro especially if a recession hits later this year.
For those interested I used Hargreaves Lansdown currency account and on a mid market of 1.1929 I secured 1.1969, not brilliant considering the euro was sitting at 1.16 not a coupe of months ago. My gut feeling is that things are going to get worse (i.e. euro weaker) leading up to March when the union is supposed to pass the new legislation, then if the ECB starts to seriously consider QE then the currency will further weaken and finally the eurozone might see benefits in a weak euro especially if a recession hits later this year.
QED87 said:
For those interested I used Hargreaves Lansdown currency account and on a mid market of 1.1929 I secured 1.1969.
That is an excellent rate, just one third of a percent from mid. Do you mind if I ask approximately what the amount was? I have been getting much worse rates, typically 1-2% from mid, but perhaps I was transferring less (generally 5 figures)? Thanks
Steven Quas
Hamburg
voicey said:
If the Eurozone did fall apart then I expect that we can look forward to capital controls - in which case the OP wouldn't have a hope in hell of getting his EUR back into the UK.
voicey - could you explain what you mean by capital controls? I had imagined that there might be a few weeks of chaos and restrictions if say Italy left, but would you expect something longer term?Steven Quas
Hamburg
Steven Quas said:
voicey - could you explain what you mean by capital controls? I had imagined that there might be a few weeks of chaos and restrictions if say Italy left, but would you expect something longer term?
Steven Quas
Hamburg
Wikipedia has an entry: http://en.wikipedia.org/wiki/Capital_controlSteven Quas
Hamburg
If the Euro broke up I would expect governments to impose capital controls - the last thing any European country wants is for all the foreign money that has been invested in it to be withdrawn. Brits that own foreign property might find it difficult to bring money back from the sale of said property (not withstanding the fact they probably wouldn't be able to sell in the first place).
voicey said:
Wikipedia has an entry: http://en.wikipedia.org/wiki/Capital_control
If the Euro broke up I would expect governments to impose capital controls - the last thing any European country wants is for all the foreign money that has been invested in it to be withdrawn. Brits that own foreign property might find it difficult to bring money back from the sale of said property (not withstanding the fact they probably wouldn't be able to sell in the first place).
Just to agree on your last point. The property market here in mid France is deathly calm. And employment for expats is awfull. I expect to see them going back to the UK without their houses sold. Causing hardship all round. Many are using all their savings and also selling anything they can. It's Grim. If the Euro broke up I would expect governments to impose capital controls - the last thing any European country wants is for all the foreign money that has been invested in it to be withdrawn. Brits that own foreign property might find it difficult to bring money back from the sale of said property (not withstanding the fact they probably wouldn't be able to sell in the first place).
Thanks voicey, interesting article. I can see I need to give it more thought.
magooagain - I'm surprised the situaion is so bad in rural France at the moment. Paris is a different world I guess, but we saw no sign of economic problems on a recent trip. Restaurants and bars were busy, even expensive places. I understand that a high proportion of expats from the UK, end up returning to the UK, even in good economic times so I suppose this must increase further when times are hard.
Steven Quas
Hamburg
magooagain - I'm surprised the situaion is so bad in rural France at the moment. Paris is a different world I guess, but we saw no sign of economic problems on a recent trip. Restaurants and bars were busy, even expensive places. I understand that a high proportion of expats from the UK, end up returning to the UK, even in good economic times so I suppose this must increase further when times are hard.
Steven Quas
Hamburg
Edited by Steven Quas on Saturday 16th March 14:54
Steven Quas said:
Thanks voicey, interesting article. I can see I need to give it more thought.
magooagain - I'm surprised the situaion is so bad in rural France at the moment. Paris is a different world I guess, but we saw no sign of economic problems on a recent trip. Restaurants and bars were busy, even expensive places. I understand that a high proportion of expats from the UK, end up returning to the UK, even in good economic times so I suppose this must increase further when times are hard.
Steven Quas
Hamburg
Yes Steven expats do go back on a regular basis for all sorts of reasons. I find that the French people i know tend to be very private and prudent with their money, and seem to plan ahead.magooagain - I'm surprised the situaion is so bad in rural France at the moment. Paris is a different world I guess, but we saw no sign of economic problems on a recent trip. Restaurants and bars were busy, even expensive places. I understand that a high proportion of expats from the UK, end up returning to the UK, even in good economic times so I suppose this must increase further when times are hard.
Steven Quas
Hamburg
Paris is a total different cup of tea.
I can assure you our commerces in our local town are closing down alot. Plenty of french here are out of work also. But they do get looked after though.
If we loose a big player,ie Italy it will be very interesting to see how the French government will play it. As traditionly the tend to say very little and make out its not a problem with many things.
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