Swan talks up inflation challenge

Australian Federal Treasurer Wayne Swan has told a Labor Party conference in Perth that inflation is his government's biggest challenge, ABC news online reported at the weekend. Swan praised the State government's handling of the Varanus Island gas explosion and predicted that the crisis would impact on the September national accounts.

Pounds to Australian Dollars last at 2.0638

Buying Euros News this Week

Hi all,

just reviewing the week and these were the headlines we were watching;

UK House Prices to Drop 35 percent according to Capital Economics

UK Housing Market directs the Pound Selling

Qatar invests more than £2bn in Barclays

US Fed keep Interest Rates at 2 percent

Stock Markets Crash in June Worst Since Depression

Hope you keep well

Regards

IMSFX

Euro Pounds

The Pounds fortune seams to have change and it seems in vogue again to Buy Pounds and Sell US Dollars and the next target on the technical charts would be 1.9991 which is the 200 day moving average followed by 2.0200 (normally a very good indicator).

The Euro to Pound is a little more difficult to work out as it has just whipsawed over its 80 day moving average which is roughly 0.7900. Look for it to stay capped at 0.7950 and a downside target of 0.7450.

GBP to US Dollars last 1.9875

GBP to Euro last to 1.2610

UK House Prices to Fall 35%

House prices may fall up to 35pc over the next three years, Capital Economics has warned, in one of the bleakest forecasts yet for the UK's property market. Economists Roger Bootle and Ed Stansfield said the slowdown has turned into a "full-scale slump", since the turn of the year with unemployment set to reach a 12-year high as the economy slows.

Added to Capital Economics opinion of the U.K. house prices declined by the most this year in June as buyers shunned the market, deepening Britain's property slump, Rightmove Plc said.

Full story at The Telegraph

UK strikes looms as cost of living spirals

The UK economy is a threat from rising Oil and Food prices and as Inflation is expected to hit 4 percent by year end / early 2009 people are starting to take notice that their pay doesn't go quite as far as it once did. In The Times today they have reported of a new epidemic that is sweeping the UK.

The Return of the Strike.

Gordon Brown is still trying to fix public sector pay hikes at 2 percent and inflation is running at 4 percent is leading too,

"Hundreds of thousands of public sector workers are threatening to tear up agreements and demand higher pay as the cost of living surges. "

This is a major concern for the UK economy and the Bank of England as Mr King said that it was crucial that employees should not respond to the loss of their real spending power by bidding for more substantial pay increases. The rise in living costs has not yet fed through into wage demands, but policy makers fear that if this happened it could lead to a 1970s-style prices and wages spiral.

Mark Gibbons from G&G Recruitment - a Public Sector Recruitment Agency told IMS Foreign Exchange that they are defiantly seeing more IT Job hunters looking at higher paid jobs to combat Higher Prices after falling to secure a suitable pay rise in house.

This is going to have a ongoing issue for the GB Pound Currency so worth watching

Spanish mortgage update

Mortgages in Spain are becoming more increasingly difficult to obtain as the lenders tighten their belts.

As in the UK; the Spanish lenders are constantly changing their product ranges and increasing fee’s making it a mine field for non-residents when trying to source the most suitable product(s).

AIP’s that usually take 48 hours are now taking around 4 to 5 days! And the endless list of the documents they require can be very frustrating. These however are all pitfalls that will need to be overcome when your property is due for completion.

Interest rates are also at the highest in over 5 years in Spain with the current annual EURIBOR rate at 5.5%, the banks will then add their margin of lending to this to give you your actual mortgage rate, this can be anywhere from +0.75% to +1.75% depending on the product that you take.

The key to obtaining your Spanish Mortgage is to be Patient and supply the information requested by the bank or your broker, there are no shortcuts like self cert mortgages anymore (although if you are only looking for a low LTV then some banks will offer and minimum document policy).

Using a broker although may cost a little more will take away many of the headaches as they will have constant updates and be able to feed the latest & most up to date information to you the client. Key Mortgages S.L is one such broker with access to all the big lenders in Spain; they do not charge any fee until they have actually had your loan approved! So you know you are not wasting any time or money.

For free help and advice please email info@keymortgages.net & quote IMS Foreign Exchange.

Traders Buy the Pound - than Sell the Pound!

Today was the story of two numbers for the Pound, the;

1. Consumer Price Index
2. Consumer Price Index Core Number

Firstly the Consumer Price Index came in a lot higher than expected at 3.3 percent and as a result traders bought the pound. But those who dug a little more found the Core Inflation number was only 1.5 percent well in line of the Bank of England's target and those who bought the pound vs the Euro and Dollar than sold it heavily.

None the less the inflation number doesn’t bare well for the UK Housing market as there is really no chance of a Interest Rate Cut in the UK any time soon as Bank of England's Governor King had to write a letter to Chancellor of the Exchequer explaining why inflation is over target.

In this letter King has pointed out "as things stand, inflation is likely to rise sharply in the second half of the year to above 4 percent".

The Bank of England's primary role is to insure Financial Stability and to keep Inflation Below 2 percent.

want to know more - contact us at www.imsfx.co.uk

Food Inflation - Bigger than the Subprime

Today i have chosen not to write about Buying Euros, Spanish Property or the Spanish Mortgage market for a change but on a more important issue

Food Inflation!

Food Inflation is turning out to be the prime issue at the moment not the sub prime or credit crunch. Increasing around the world food prices has boomed and as a result there are alot of hungry people demanding action.

Rice of instance has rocketed and considering that half the world’s population live on Rice this is alarming.

Here in the West it is only an inconvince at present and gives us something to discuss over dinner but there are the worrying signs that this could lead as into the largest recession since the 1970's.

Read Stephen Kings article in the Independent for a more detailed breakdown

Euro Economy Inflation worring trades as they Buy Euros

ECB: In State of Heighted Alert
By Kathy Lien, Chief Strategist of DailyFX.com

Although the Euro has plunged close to 400 pips as the currency market turned its focus to the comments made by US officials, traders should not lose sight of hawkish comments that have also been made by the European Central Bank. According to ECB member Liikanen, the central bank is in a state of heightened alert. Along with central bank members Liebscher and Noyer, Liikanen stressed the need to contain inflationary pressures and how the rise in prices is making their jobs increasingly difficult. Unsurprisingly, German wholesale prices increased more than expected last month while industrial production beat expectations in France and Italy. Growth in the Eurozone has been steady, which is part of the reason why the ECB has felt comfortable enough to be exceedingly hawkish. However the simultaneous hawkishness of the ECB and the Federal Reserve is exactly what could keep the Euro to US Dollar currency exchange rates range bound for at least the next 24 hours.

UK Consumers boycott the Fuel Pumps - Oil prices bite

UK Consumers boycott the Fuel Pumps - Oil prices bite
11 June 2008, 12:09:27
Petrol retailers in the UK have disclosed that fuel sales dropped sharply over the past few weeks and the latest figures appear to show that demand for petrol in Britain has slumped by as much as 20 per cent over the past 12 months, the Telegraph reports.

European Central Bank to Raise Rates in July?

European Central Bank to Raise Rates in July?
11 June 2008, 12:02:51
Is the ECB going to hike rates in July? Various ECB Members last night have been talking very strongly about inflation but will raising rates cause a slowdown in the Euro Zone Economy?

The Euro is today stronger against the Pound again today.

New Zealand Housing Market Stable according to The Real Estate Institute of New Zealand

New Zealand Housing Market Stable according to The Real Estate Institute of New Zealand
11 June 2008, 11:53:35

The New Zealand Housing Market remained firm in May with an average price of $345,000 New Zealand Dollars, although prices are starting to trend downwards as Vendors start accepting lower prices.

Bank of Canada leave Rates at 3.0%

Bank of Canada leave Rates at 3.0%
11 June 2008, 11:45:46

The Bank of Canada left rates at 3% against market expectations that the Bank would cut rates by another 0.25%. Inflation is the key reason for the Bank of Canada leave rates on hold which seams to be a common theme these days across the globe.

Canadian Dollar Pound Exchange Rate 1.9930

Euro Unfazed By German Growth As ECB Rate Warnings Drive Bulls

Euro Unfazed By German Growth As ECB Rate Warnings Drive Bulls

Dollar weakness further boosted the appeal of the world’s second most liquid currency: the euro. EURUSD extended its Thursday reversal by an additional 185 points to bring resistance - seen around 1.58 - within bulls’ reach. For European fundamentals, the only scheduled indicator to cross the wires couldn’t trip up the euro’s rise. German industrial production unexpectedly fell 0.8 percent through April as raw material costs rose. What’s more, factory orders contracted for the fifth consecutive month for the worst streak since 1992. The weakness in demand highlights the dour outlook for growth. Indeed, the German Bundesbank remarked that after the surprise 12-year high in growth through the first quarter, activity in Deutschland over the second and third quarters would be “more subdued.” However, the ECB is clearly less concerned with growth and more attuned to inflation. In a speech Friday, ECB member Alex Weber confirmed the market’s forecast for a July rate hike when he said financial markets clearly understood the ECB’s message at yesterday’s public address.

UK housing market falling faster than last recession, says Bellway - Telegraph

UK housing market falling faster than last recession, says Bellway - Telegraph

The housing market is deteriorating at a much faster rate than it did during the recession of the early 1990s, Bellway said, as expectancy grew in the City that some UK house builders could be forced to raise capital to shore up their balance sheets. Bellway said that the spring season - traditionally a strong sales period for house builders - failed to take off and a restricted supply of mortgages was exacerbating the problem. It now expects volumes to fall by 10pc-15pc this year.

European Rate Hikes Next Month? Euro Pound Rallies on Trichet's comments

The Euro surged nearly 200 points against the US Dollar and the Pound on Thursday as European Central Bank President Jean-Claude Trichet indicated that rate cuts were off the table, and in fact, a rate hike was possible as soon as next month.

Commodity Currencies Could Be Turning Lower

Commodity Currencies Could Be Turning Lower

The New Zealand dollar appears to be leading the way where other commodity currencies will follow - downwards. This week's fall in the New Zealand dollar may well have been triggered by comments from the Reserve Bank of New Zealand. But, with crude prices falling, the U.S. Federal Reserve apparently keen to curb the recent rally in commodity prices and with risk aversion once again on the rise, a more widespread switch out of commodity currencies could be underway. This will contrast with the support the Euro is likely to receive after European Central Bank President Jean-Claude Trichet hinted that Euro-Zone Interest Rates could rise as early as next month.

Spanish Property in for more Doom as ECB's Weber said investors should prepare for an increase in interest rates.

Spanish Property in for more Doom as ECB's Weber said investors should prepare for an increase in interest rates.

At IMS FX we have been keeping a Eye on Spain and now see that Spanish Prices are unlikely to recover any time soon as ECB's Weber said investors should prepare for an increase in interest rates.

ECB leave rates at 4%

ECB leave rates at 4% - but Trichet very concerned about inflation and will act in a "firm and timely manner". This has pushed the euro rate today higher.

Bank of England to leave Rates unchanged?

The Bank of England is expected to leave rates steady on Thursday at 5.00 percent the lowest since December 2006 for the second consecutive month. Since the Monetary Policy Committee is anticipated to leave rates unchanged, they are unlikely to issue a monetary policy statement which should leave the market’s reaction to the news somewhat muted. Nevertheless, given the sharp drop we’ve seen in the British pound in recent days, even an announcement in line with expectations could lead the currency to rebound somewhat.

Will inflation force European Central Bank's hand

The European Central Bank is expected to leave rates unchanged at 4.00 percent, but as usual traders will pay keen attention to the content of ECB President Jean Claude Trichet’s remarks at the post announcement press conference. Thus far, Mr. Trichet has been consistently hawkish, focusing on price stability rather than growth in the 15 member union. Mr. Trichet has good reason to worry about inflation, as the latest CPI readings in the region reached their highest levels in a decade printing at 3.6 percent in May, which is well above the ECB’s 2 percent target. Fueled by higher energy prices and rising food costs, the Euro-zone economy is unlikely to see any meaningful relief in inflationary pressures until oil prices fall significantly from their record highs. Euro Pound exchange rate is currently .7900

George Soros, weak US Dollar is to blame for Economic slow down

George Soros, weak US Dollar is to blame for Economic slow down
04 June 2008, 09:01:09
George Soros the famous investor has again stated that the weak US Dollar is responsible for the economic slow down. He went on to point out the there is a direct relationship between US interest rates and dramatic rise in oil price.Weak US Dollar forces the Oil price up as Oil producers want to insure a minimum profit regardless of the exchange rates of other countries.

High Street reports drop in Sales but Online Sales boom

High Street reports drop in Sales but Online Sales boom
04 June 2008, 08:58:57
UK consumers spent a record amount online with retailers in up by 35 per cent to 14.7bn Pounds in 2007

UK interest rates now 7% for 2 year fixed rate mortgage

UK interest rates now 7% for 2 year fixed rate mortgage
04 June 2008, 08:55:50
Yesterday we reported that the cost of a 2 year fixed mortgage was 7%. Today the Telegraph has reported that round 28.3 per cent of young working households in Britain cannot afford even the cheapest property in their area.

Europe Slowdown due to Inflation not financial crisis

European Central Banks Noyer said signs of Eurozone slowdown due to inflation, not financial crises. Foreign Exchange fluctuations mainly US Dollar problem. Hopes gap between Euro and US Dollar narrows and Japanese Yen weakness has already partly corrected. No Mention of the weak Pound Euro Rates.

Pound Woes Continue

The Pound is still on shaky ground at the moment and is still hanging onto the 1.9500 level. The current mortgage and housing market conditions in the UK look set to effect the UK economy in a major way and will increase the pressure on the Bank of England to cut rates this week. This though will only strength the Euro Pound exchange rate to above 0.8000.

Spanish property: the fiesta's over

Spanish property: the fiesta's over

this is a interesting read about Polaris World Property

Polaris World invites you to 'live the dream' at its gigantic golf resorts. But as the market sours, is it turning into a nightmare?

Interest Rate and Foreign Exchange

It’s a full week of central bank news, central bank meetings and data.

Reserve Bank of Australia,
Reserve Bank New Zealand,
Bank of England
European Central Bank

Are all expected to keep rates on hold but more important is what they all say about the mix of upside risks to inflation and downside risks to growth. Out this list though watch the Australian announcement as inflation has become a problem and the number of Australian Banks suggesting that the RBA will hike rates to double digits by year end.

Although the key news for Foreign Exchange markets this week is the US employment report on Friday where consensus is for another negative print of -60K.