Sterling for 2009

bazwaldo

Anyone got any opinions on what will happen with the sterling/euro rate over the next few months?

Sterling looks to be making a bit of a recovery today. Theres a Bank of England meeting on Thursday I believe where a rate drop is expected. Will this make sterling weaker or stronger?

So is the time now to make the most of the euro purchasing power or is todays sterling comeback to be shortlived?

cavedave

I think* that sterling will weaken against the Euro.
From this article

If the bank prints money, and then lends that money into the banking system, the banking system can then use the money to buy up government bond issues, thereby financing government debt.

If the BoE really is juggling money like this it probably won't end well.

Here is another article about what would have to happen for Sterling to be in real trouble. It also seems like interest rate policy is currently being constrained by fears about Sterlings value.


*and it is think i do not know and I hope i am wrong.

gimmick

Accoring to this, the euro will be weakening

http://www.bloomberg.com/apps/news?pid=20601102&sid=a0tUFCXZb7cM&refer=uk

Pound Set for Record Weekly Gain Versus Euro as BOE Cuts Rates
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By Matthew Brown

Jan. 9 (Bloomberg) -- The U.K. pound headed for its biggest weekly advance against the euro since the common currency’s debut in 1999 as the Bank of England slowed the pace of interest-rate cuts.

The pound was little changed today versus the euro and the dollar as the U.K. Office For National Statistics said factories raised prices at the slowest annual pace in a year and manufacturing extended its worst slump in almost three decades. U.K. policy makers yesterday cut the benchmark rate by 50 basis points, the smallest reduction since October, to 1.5 percent to help limit the country’s first recession in 17 years.

“The correction in euro-pound has clearly been the main story of the week,” Steven Pearson, a foreign-exchange strategist at Merrill Lynch & Co. in London, wrote in a research note today. “While initially understandable in the context of an overshoot relative to metrics like short-term rate spreads, we would now caution against looking for too much in the way of further downward progress.”

The U.K. currency was at 89.90 pence per euro at 10:41 a.m. in London, from 90.10 pence yesterday, brining its appreciation this week to 6.4 percent. The pound also strengthened 4.8 percent against the dollar this week to $1.5246.

This week’s gains have pared a record 23 percent decline against the euro last year that brought the pound close to parity with the European currency. Sterling weakened to an all- time low of 98.03 pence per euro on Dec. 30.

‘Further Traction’

Bundesbank President Axel Weber said yesterday in a speech in Cologne that the German economy, the euro region’s largest, may contract this year by more than the European Central Bank has forecast. The ECB will lower its main rate by 0.5 percentage point to 2 percent on Jan. 15, according to the median forecast of 26 economists surveyed by Bloomberg.

“The pound will gain further traction against the euro and dollar as monetary and fiscal authorities seek to preserve international investor interest in sterling-denominated assets,” said Stephen Gallo, head of market analysis in London at Schneider Foreign Exchange, which counts FTSE-listed companies and wealthy individuals among its clients. “Sterling’s recent declines prompted the Bank of England to take a much more cautious approach to cutting rates this month.”

U.K. government bonds rose, pushing the yield on the 10- year gilt down six basis point to 3.16 percent. The 5 percent security advanced 0.52, or 5.2 pounds per 1,000-pound ($1,526) face amount, to 114.57. The two-year gilt yield was declined five basis points to 1.63 percent.

Unless I have read it wrong. Going mad I did not buy a few hundred Euros worth last week. Got greedy thinking it would go over.

Looking at the exchange rates for the last week - it was 0.97ish on 02/01/09. It is 0.8938 today. Thats a pretty huge recovery in the space of one week. I think, in my very uninformed and uneducated view, it will level off around 0.83-0.85

cavedave

Yep turns out my dire warnings were wrong at least in the short term

“The euro fundamentals are looking increasingly shaky,” Paul Robson, a currency strategist in London at Royal Bank of Scotland Group Plc, wrote in a research note that recommended selling the euro against the pound. “It’s clearer than ever the ECB has seriously misjudged the dire situation the region now finds itself in.”

If the Eurozone recession is worse then the British one then the euro will drop against the pound?

bazwaldo

Bulling too. I was going to open sterling account for a few months. Earn a poor interest rate but withdraw when sterling improved. I could bit the bullet and go for it now if sterling is going to be stronger from now on, but with the exchange being at 89 and and not 97 its not the no brainer it was. Still at 89 its pretty good though and a gain should be made over a few months.

Goes to show that no one knows what way its going. For each prediction I've read theres an opposite prediction by someone else.

daithijjj

in my (also uninformed opinion)........i would have to agree that i think the pound will level off around 83-85p to the euro...........i live in ireland now but all my savings are in GBP. I was seriously thinking about biting the bullet and transferring to the euro but im holding on this now. Worst comes to worst, i will just buy a cheap house over there when the prices fall 10-15% this year (source bbc news 24) and sell it on in a further year when it starts to emerge for the positive again.................why do i just get the feeling that foreign companies will see britain as an attractive opportunity again?.......still regretting the 1.42 euro to the pound i turned down 2 summers ago *sigh*...........i firmly believe that the best time to get stuck into the pound with your euros was at 97p, i just cant see it ever getting to parity but its choppy waters at the moment for sure, who knows with these crazy swings in value?

Rocket!

bazwaldo wrote: »

Goes to show that no one knows what way its going. For each prediction I've read theres an opposite prediction by someone else.

Exactly. I've read as many articles saying its on the way down to 80 as ones saying it'll still make it to parity. Its all trivial. The currency market is a cruel one. Its highly unpredictable.

Im hoping there'll be some sort of a pullback into the nineties next week though. Or else I'll have lost a lot of money.

gimmick

I am going to a stag in Newcastle next month. I am going to buy €200 worth of sterling tomorrow at the credit union just to hedge my bets. Not going to be a huge difference one way or other given the small figure we are speaking of.

daithijjj

gimmick wrote: »

I am going to a stag in Newcastle next month. I am going to buy €200 worth of sterling tomorrow at the credit union just to hedge my bets. Not going to be a huge difference one way or other given the small figure we are speaking of.

its a pound a pint in quite a few places gimmick.........enjoy the stag;)

gimmick

:eek: Danger danger. Cheers

daveirl

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