Cautious trading ahead of trade talks deadline
9 October, 2020
As we come into Friday we see out a fairly uneventful week on the currency market, investors continue to trade cautiously as the 15th of October looms awaiting that all important update on whether the UK and the EU can come to an agreement on a trade deal or at least one in principle. With talks entering the final week with barely any coverage or updates to how the talks are progressing the increasing fear is even if a deal can be struck in time with a no deal Brexit an evermore disastrous possibility for Sterling. If no deal can be reached we could see a severe rate reversal, when this was mooted previously Sterling dropped into the 1.05’s an all time low, should a no-deal with the EU become a reality then it fully conceivable that parity on the Euro may be a real possibility. Conversely, If a deal or deal in principle at least can be struck we could see a healthy push towards 1.11/1.12 and above.
What impact can these scenarios have on your property purchase in monetary terms?
Let’s say for example your are purchasing a property for €150,000 with completion due within the next 2/3 months and you’re aiming for a rate of 1.10 with a potential cost of £136,363 for your property purchase overseas. However, should the market not reach this desired level, a no deal Brexit announced and the market plummets to the lows of 1.05 this potentially can up the cost of the property to £142,857 increasing your budget by roughly £6,500.
Contract options available to you
You can guarantee that whatever the outcome on the 15th of October the currency market is sure to react and we can expect a volatile week ahead next week. If you are more risk averse then a forward contract may be the right contract for you. Our forward contract optional is available to you whereby you can fix in the rate now for up to two years in advance with just a 10% deposit and in doing so removing the risk of a potential drop in rates and peace of mind that your property purchase is within your budget and affordable by securing a rate with us today. If you like to have more of a gamblers mindset and optimistic the rates may improve then a Limit order could be the contract for you. This option gives you the ability to set a desired rate and should the market reach the rate set then your currency will automatically be bought with full settlement of the contract due within 2 working days.
Coronavirus continues to grip the economy
Coronavirus continues to take hold as the infection rate is again increasing with cases rising rapidly by the day. This is giving the government a new headache as they are now looking to control the virus by closing pubs and restaurants in the north east. If this has a positive affect then we could see more lockdowns put in place throughout the country. This could dampen a Sterling revival should further restrictions and lockdowns be put in place by the government as the economy would endure further woes with money not being spent in the retail and hospitality sectors.
Today’s Key Date Releases
This morning we have already had key data releases from the UK which could be a warning of things to come. Industrial and manufacturing production released at 7am this morning posted a 0.3% figure, this is a sharp drop from the 2.5% expected. Production in the UK had been halted due to a national lockdown in March but started to make a recovery when restrictions were lifted. This Recovery was projected to continue but the figures this morning suggest otherwise. These negative figures already put the pressure on Sterling early doors for today trading. Should you have a requirement for Euros it may be prudent to get in touch with you broker today to discuss your options.
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