Inflation has fallen to 0.3% in January down from 0.5% in December primarily due to the falling price of oil. It is good news for the consumer although the pound does not usually perform under these circumstances. The Bank of England has made clear that inflation will fall further which poses a real risk for the pound. The combination of such low inflation and a general election in May could make for some challenging times and the prospect for a sizeable decline after the pounds recent good fortunes. A test back towards 1.30 for GBP EUR seems plausible.
This morning sees the Bank of England minutes from the February meeting as well as UK unemployment numbers which may give added direction. Register for an account to access the best exchange rates by clicking here.
Negotiations between EU finance ministers and Greece continue as we approach the end of February deadline when liquidity will dry up. With a reported €2 billion leaving Greek deposit accounts each week this is worrying news for Greece. If deposits continue to be withdrawn then it will not be long before there is insufficient collateral for new loans. The current programme of loans ends 28/02/2015.
The bigger picture is that it’s all the other countries and banks which are exposed to Greece where disaster could strike. Before the onslaught of the financial crisis in 2008 nobody envisaged the paralysis of the markets that would follow from the collapse of Lehman Brothers. Today Greece is that hot potato and whilst not excessively large it is by no means small either. A bad outcome or Greece exit could create all sorts of financial problems markets across economies. Those with funds still in Greece may be well placed to follow the herd and consider moving into another currency such as sterling where the economic climate is more stable.
Despite the weaker UK inflation numbers the pound is still holding firm against the dollar. This evening sees the US Fed minutes where high volatility is expected. Any clues as to when Janet Yellen intends to raise interest rates, or not as the case may be, should give added direction for the dollar. My view is that the Fed will soon appear to be in no hurry to hike and the dollar may see new weakness with a move to 1.56 for GBP USD. For information on how we can assist with a transfer of dollars then please click here
One month after the Swiss National Bank removed its peg against the Euro and it is clear the pound has been gradually and consistently climbing higher against the Swiss Franc by about 10% after that disastrous fall. Those clients who took out mortgages in Swiss Francs to fund property purchases in Cyprus and other European countries would be wise to keep an eye on these developments. Only one month ago the situation looked dire for this group of individuals who were suddenly looking to pay an additional 20% to cover their mortgages. Levels still have some way to go before the monumental drop happened but the situation is no doubt better for those needing to buy Swiss Francs. With growing uncertainty in the Eurozone the Swiss Franc is likely to grow stronger using its safe haven status. Buyers may wish to take advantage of the recent spike in the pound against this currency.
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