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Strong pound! The right time to buy?

Thu, 12th Apr 2012

We have just received the following report from our friend at Foreign Currency Directwhich might be of interest to anyone wondering whether now is the time to take the plunge and buy in Greece.

Brief Overview Of Currency Trends

I thought I would update you all with some guidance on major currencies should you have an upcoming transaction to make.

GBP – Sterling has rallied against most currencies compared to levels seen earlier this year with notable consolidations against the Aussie and USD as well as closing in on an 18 month high against the Euro! Analyst are now suggesting that the UK will avoid a double dip recession by posting modest growth in the latest quarter despite growth figures for last year being revised down. The official growth figures aren't posted until 25th April so it remains to be seen whether recession is actually off the cards. Sterling can be pretty much summed up on the basis that whilst things are bad, “they aren't as bad as they could have been” and as a result the pound has strengthened however until the UK economy starts growing strongly and interest rates go up, which could be some way off, I would not expect huge improvements for the pound.

EUR – You could be forgiven for thinking that the media is simply rehashing news stories from 6 months ago with lazy journalists replacing the names “Greece” with “Spain”, however concerns are still growing around the single currency's fourth largest economy. Some technocrats have used guarded language stating Spain may “seek a program” later in the year suggesting a bailout may be needed. Recent measures by the ECB seem to have stabilised the problem but as mentioned in previous alerts the Euro is by no means out of the woods and I suspect this story will continue to run. In my view USD EUR should be on hold for the moment but GBP EUR represents a good buying opportunity already (remember continued turmoil in Europe will likely damage the fortunes of the UK being our biggest trading partner).

USD – Economic recovery in the US still appears to be on track with growth rates and job creation figures that George Osborne can currently only dream of. However GBP USD, or Cable as it is otherwise known, has been pretty range-bound because although growth usually strengthens a currency, it has also meant global investors have been more confident and prepared to move away from the Dollar and into riskier currencies in search of greater returns. The Federal Reserve's commitment to low interest rates has also meant the Dollar hasn't surged in value despite the recent growth. Again in my view GBP USD represents a reasonably good buy at the moment although I would be tempted to wait on USD EUR.

AUD – I was almost tempted to copy the update from my last alert relating to the Aussie given that the economic conditions seem identical! The RBA is still concerned over the strength of the Aussie and worried about the sustainability of demand from China and Europe for its raw materials. If you are looking to sell Aussie Dollars I would be inclined to move quickly. If you need buy Aussie in the very near future from sterling then keep a close eye on the rate at the moment as it is currently the highest since December!