International real estate investors will be breaking open the champagne at today’s news of the 2 Dollar Pound. Florida real estate for example has already low prices and many attractive incentives for investors this coupled with a weak Dollar makes investing in Florida real estate irresistible. Sterling touched its highest level against the Dollar for 26 years. Many forecasters believe that the Dollar has further weakness in store but after an almost unbroken two-week run we could see some consolidation first.
Moneycorp foreign currency dealers report last Monday’s opening level just below $1.99 . Sterling pushed higher on Monday and Tuesday to peak above $2.01 and then slid back to trade mainly in a half-cent range above $2.00. This Monday morning it was testing the bottom of that range.
The US Dollar was forced to spend another week looking poorly as investors continued to place more emphasis on weak US data than on any good news that cropped up. The number of housing starts and building permits showed what should have been welcome improvements but the National Association of House Builders became more pessimistic about the property market. Industrial production fell and two regional Federal Reserve Banks, New York and Philadelphia, reported weak manufacturing sectors. It all seemed to prove that the next move for US interest rates would be downwards.
For the first time a Governor of the Bank of England had to explain to the Chancellor why inflation had drifted more than one percentage point away from its target. On top of Rightmove’s 15 per cent rise in house prices these figures appeared to almost guarantee a 5.5 per cent bank rate next month. Some analysts even believe that the Bank could spring a 50 basis point increase instead of the traditional 25 bp, just to make everyone sit up and take notice.
What to do now?
If all goes according to plan the Pound will make further gains. Buyers of the Dollar should nevertheless exercise a little caution by covering some of their requirement now, while Sterling is close to its highest level for a generation.
