The Eurozone crisis has made it now essential for overseas investors to take advice before purchasing abroad.
The UK economy has seen a surprisingly strong week,
which has marginally improved the value of sterling. The major news
this week was the Bank Of Englandââ¬â¢s Quantitivie Easing announcements on
Thursday. Despite expectations in the week leading up to the
announcement that the BoE would inject a further ã75 billion into the
economy, they announced on Wednesday that this had been reduced to ã50
billion. This suggests that the Bank Of England is increasingly
confident in the UK economy, further removing fears of a second
recession. All other Bank Of England announcements were as anticipated,
including holding the interest rates at the historical low of 0.5%.
However, since they have been held at this level since 2009, this
decision came as no surprise. This positive news for the UK economy has
made the conversion rates for transferring pounds into other currencies
very strong.
The
Eurozone has not enjoyed the same level of good news this week. Once
again the focus is on Greece, and their apparent inability to act on
their economy. Amid widespread protests in Athens, Greek MPs are
strongly expected to vote in favour of new austerity measures on Sunday,
expected to cut the Greek budget by 325 million Euros. This would allow
the European Central Bank to give Greece a further 130 billion euros in
Bailout funds. However, like previous Greek bailouts, this will likely
be a short-term solution to the problem, as Greece simply doesnââ¬â¢t have
enough money to pay back its own debts, and with unemployment rising
about 20% this week, it seems unlikely their economy will recover in
time. With Greece dragging the entire Eurozone down, it is likely we
shall continue to see similar rates for transferring sterling to Euros
that we have seen for the last month, which are the highest since
September 2010. The European Central Bank itself has decided to leave
Euro interest rates unchanged at 1%.
Germany,
the economic powerhouse of the Eurozone, has announced this week that
exports for 2011 rose 11.4%, earning the company a further trillion
euros, ensuring their economy remains strong. Angela Merkel is
continuing to support the Eurozone, stating that if the Euro fails,
Europe fails. This solidifies the fact that it is incredibly unlikely
that the Eurozone will collapse in its entirety, even if weaker
economies such as Greece are forced to drop out. In fact, many analysts
are now of the opinion that if Greece defaulted on its debts and dropped
out of the Euro, the value of the currency would increase. Therefore,
anyone looking to transfer money into Euros for the purposes of buying
overseas should not worry about the entire currency collapsing.
Sterling has also seen strength against the US Dollar this week, reaching a 12 week high for transferring pounds into dollars.
This strength is unlikely to last for long, however, due to the
announcement that unemployment rates in the US have dropped to 8.3%, the
lowest in three years, which is likely to provide further confidence in
the US economy, which will likely cause the value of both the euro and
sterling against the dollar to drop.
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