Budget, Sterling/Euro forecast & Regular Payments

Thursday 22nd March 2012
Good morning. Pound/Euro had a mixed day yesterday. Higher than expected borrowing figures pushed rates lower in the morning, however rates were to recover later in the afternoon. The Budget had little to no effect on exchange rates at all, and was perceived as neutral for the currency. Today we will look at the Budget, the Bank of England minutes, and how to get the best deal for Regular Payments in Euros. Below shows rate movements throughout the day yesterday:

~Currency Movements on Wednesday 22nd March 2012~

UK Budget

The budget delivered yesterday was pretty much as expected, contained no real surprises and had no effect on Sterling exchange rates. The chancellor George Osborne was seen to be sticking with the coalition government’s austerity drive which aims to bring the country’s finances back into line in five years, though sluggish growth hampered by fiscal cuts remains a concern to investors.

As it had little effect on rates, I won’t go into any real detail on the budget here, but for those that are interested, the key points are outlined here on the BBC website.

Of interest to me were 2 key facts; Independent Office for Budget Responsibility (OBR) revises up UK growth forecast for 2012 to 0.8% – from 0.7% – better growth should be good for the Pound in the long term.

Also, borrowing this year to be £126bn – £1bn less than forecast in the autumn. Predicted to be £120bn in 2012-13 and £98bn in 2013-14. Forecast to fall to £21bn by 2016-17. Again, lower borrowing would cut the deficit and could give the Pound a boost should it prove to be the case.

Higher borrowing figures published just before the budget

The Office for Budget Responsibility’s forecasts for growth and borrowing detailed by Osborne were marginally more optimistic than the previous estimates, but the earlier release of much higher-than-expected public sector borrowing for February pulled the Pound down, as illustrated in the charts above. Any future deterioration in the borrowing figures may well mean that ratings agencies Fitch and Moody’s downgrade the UK’s prized AAA sovereign debt status, a potential source of weakness for the UK currency.

BoE Minutes

The BoE’s latest policy minutes were largely overshadowed by the budget, but they showed two policymakers voted for more monetary stimulus to support the economy. Most in the market had expected a unanimous vote for asset purchases to be left on hold following the February decision to increase the scheme by 50 billion pounds to 325 billion. This also put Sterling under pressure before getting better later in the day.

Making Regular Payments

When owning property overseas, many people will need to make Regular monthly transfers between Pounds and Euros. The natural inclination is to arrange this sort of thing through your bank; however it’s usually a fairly expensive way of doing it. When making Regular Payments on a monthly basis, we can save you money compared to your bank through lower costs and much better exchange rates. Our Regular Payment Plan means you simply set up a Standing Order for the amount you want to convert, and your transfers happen automatically.

We purchase all the Euros in bulk, meaning that you can achieve commercial exchange rates even on smaller amounts. Due to the better rates and lower costs, sending €1000 per month over 10 years could save you nearly £10,000.00 compared to using your bank, as the figures below illustrate.

(Figures based on Foremost rates and typical bank rates on 21st March)

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exchange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

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