Weekly Cypriot £ rates and comments - week commencing 29th October 2007

 

 

Not a great week for sterling losing ground it seems against everything apart from the US$. The Bank of England warned that the UK remained vulnerable to shocks from the global credit squeeze which isn't a surprise and certainly wasn't a help to sterling. The housing market continues to suffer here in the UK with a significant reduction in mortgage approvals and it appears to be a buyers market. Also the market is beginning to believe that UK interest rate reductions are likely sooner rather than later. A period of uncertainty for sterling.

 

The Cypriot £, which is pegged to the €, is still on the up. Economic data out of Euro land has been reasonable and as such both sterling and the US$ are losing ground. The Cypriot £ sits at Cy.£0.830/£1 inter bank. However, the Euro zone is slowing with even Germany reducing its growth forecast for 2008 from 2.4% to 2.0%. The European Central Bank is unlikely to reduce € interest rates in the short term as it is concerned about inflation and as such this will benefit the Cypriot £ given the expected interest rate cuts elsewhere. Still seems like an excellent time to repatriate Cypriot £ funds.

Cypriot £ rates and comments - 22nd October 2007

 

Sterling is holding its own. The minutes of the last Bank of England meeting were released and the vote had been 8 to 1 to keep UK interest rates on hold. The credit crunch was obviously a concern but inflation is still a worry to the BOE. The last inflation figure of 1.8% was within the 2% target and we now wait for the next inflation report in November. New mortgages are slowing down as the UK housing market begins to slow.  Still difficult to see much upside for sterling short term.

 

The Cypriot £, which is pegged to the €, is still benefiting from a positive flow of economic data in Euro land and the "underperformance" of both sterling and the US$. The current inter bank rate is Cy.£0.835/£1. One problem that will ultimately have a major effect on the Cy.£ is the appreciation of the € against the US$ which will make Euro lands exports less competitive than those from the US. The French continue to complain about the strong €. In the space of 18 months the € has gained 20% against the US$. How is Airbus able to compete with Boeing when Boeing have gained a 20% cost advantage doing nothing! So don't assume that the Cy.£ will continue to move in one direction only. Seems like a good time to bring funds to the UK.

Weekly Cypriot £ rates and comments - week commencing 15th October 2007

Sterling didn't have a great week or so losing a little bit of ground against most currencies. No clear reason why this should have been the case and I think it was more likely a situation of better news elsewhere. The UK housing market seems to be slowing which will affect consumer confidence. We also wait for the minutes of the Bank of England minutes which will, hopefully, give a clearer picture of how they view the economy, inflation and interest rates. I suppose we should be pleased that there have been no further "Northern Rocks" this week.

 

The Cypriot £, which is pegged to the Euro, sits at an inter bank rate of Cy.£0.835/£1 and continues to benefit from strong economic data and not just from Germany. French and Italian industrial data has also been good. It has to be remembered that a lot of exports head east rather than west. The economies of India, Russia and China are all on the up and as such imports from Euro land are not, at this stage, being unduly influenced by what is happening to the US$/Euro exchange rate. The Cypriot £ is likely to have the upper hand for a while and seems like a good time to bring funds back.

Weekly Cypriot £ rates and comments - week commencing 8th October 2007

 

Sterling has had a steady week against the Euro and the US$ but lost ground against the commodity backed currencies of Canada and Australia. The Bank of England met this week and UK interest rates were kept on hold. This was as expected. The trouble with the BOE is that it takes a couple of weeks for the minutes of the meeting to be released which means that we are unsure how the 9 members voted and unclear on how they view the current economic climate. Are they still worried about inflation or are they worried about the economy slowing too quickly? We will have to wait and see. Thankfully there has been no further fall out from Northern Rock Bank.

 

The Cypriot £, which is pegged to the Euro, has continued to weaken albeit slightly to Cy.£0.839/£1. The European Central Bank kept the € interest rates on hold. This was as expected but unlike the BOE they do "talk" to the market at the same time as making the announcement. The language used by the ECB has led the market to believe that Euro interest rates are unlikely to be raised in the next few months if at all. Also there has been a lot of talk in the press about the strength of the € relative to the US$ really beginning to hurt Euro land exporters. Difficult to assess the effect this is happening but again it supports the view that Euro land interest rates are on hold for a while. Still feels like a good time to bring back funds to the UK.

Weekly Cypriot £ rates and comments - week commencing 1st October 2007

 

No major negative news last week to hurt sterling. In fact the Bank of England made £10bn available in short term funding and there were no takers. However the sight of queues outside of a British bank with savers desperately trying to get their money out has not inspired confidence. All in all a major mess created by the BOE and the Government. The BOE meets this week and we wait to see if they hold firm on interest rates or follow the example of the Fed and cut interest rates. The market expects them to hold firm. It will take a while for sterling to make a significant recovery especially against currencies such as the Euro. It certainly seems a good time to bring funds back to the UK.

 

The Cypriot £ which is pegged to the Euro has weakened slightly from it highs of early last week to Cy.£0.835/£1 inter bank. Euro land economic data on the whole has been positive with German unemployment down, euro zone money supply growth remaining strong and inflation data making Euro interest rate cuts highly unlikely. However the strength of the € against the US$ means that exports are beginning to suffer and business confidence is weakening. However, the Cypriot £ is likely to remain strong for the short to medium term.  Sterling has regained some stability over the last ten days against the Cypriot £ but upside seems somewhat limited in the short term.