If you are working overseas then it is the ideal time to maximise your currency movements and improve on the bank currency rates.
Sterling remained range bound against the USD on Monday, although at the lower end of the range, without ever really testing the support level of 1.5800. Sterling reacted strongly to US trends pushing back towards 1.5900 by Monday evening as well as pushing on to a 19 month high against the Euro before a retreat back to the low 1.21’s. The only data release yesterday was the house price rise of 2.9 percent which had a supporting effect for the currency.
CPI and RPI data is released today at 9:30am. The expectations for this data is a minimal effect will be felt, however, a lower than expected figure could result in a move towards further quantitative easing. As always, safe-haven considerations will remain important while the doubts over the Eurozone‘s ability to support the struggling economies within, Sterling could continue to benefit from outflows from the area, having said that, if risk appetite reduces and the banking sector should come back into focus, support for the UK currency could quickly disintegrate.
More optimistic news from the US as their policy of spending their way out of trouble, compared to the European policy of extreme austerity, continues to pay dividends in the short term. Retail sales were up 0.8 percent yesterday across the board, showing consumer appetite remains strong, however, a housing index showed a drop from 28 to 25, Tuesday’s housing starts will be watched very closely as a result. The losses in this sector were expected after a weather induced growth in the first quarter.
Euro continues to struggle for support against the major currencies as Spanish yields reached 6.18 percent yesterday, a 4 month high, however, the single currency has recovered from a low of just below 1.3000 against the USD, the lowest level in 2 months. Speculation increased, yesterday, that the LTRO, mentioned last week, may be reintroduced by the ECB.
The long term refinancing operation (LTRO) is a cheap loan scheme for European banks, these loans are due to be repaid within three years at a rate of just 1 percent. This may be necessary as banks are low on cash and investors are weary of placing more money in the sector, so the ECB may have to reinstate this process to stave off a liquidity crisis in the banking sector.
Stability for the Euro was provided by Fitch yesterday when it was announced no action would be taken against Italy’s credit rating. There is a Spanish bill auction due today and a bond auction on Thursday, the results of these could go a long way to showing overall sentiment in the region.
What does this mean for you?
With Etihad Airways announcing a plan to employ 400 new staff, albeit Omani nationals, the foreign currency rate for these regions becomes all the more important.
This recruitment drive shows the areas ability to hire, whilst cuts and job losses are still evident in the already emerged market of Europe.
If you are working in the region for a period of time but based overseas on a longer term you will eventually need to transfer salary back to your home country, you may even be transferring this in smaller amounts weekly or monthly as it is paid to you.
With the current position the UK is taking up as an alternative to the US as a safe haven currency, the extra strength in the currency could mean you salary becomes less valuable.
If you would like to discuss methods of protecting your salary against detrimental fluctuations in the exchange rates please contact:
Call us on +44 (0)20 7220 1740
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Morning Market Rates: (Please note: These are indication prices only, they are not offer rates)