November 2016 currency update: will the pound continue to recover from the flash crash?
PUBLISHED: 15:17 04 November 2016 | UPDATED: 15:37 04 November 2016
Despite the sudden flash crash earlier in October, GBP/EUR has only shifted 3.8% over the past 4 weeks which will reassure many property buyers in France but will this trend continue?
Despite the sudden and unjustified flash crash impacting the Pound earlier in October, buying Euro rates have actually enjoyed their most stable period since the beginning of 2016. GBP/EUR has only shifted 3.8% over the course of the past 4 weeks, giving anyone interested in buying a property in France a bit more breathing room and some reassurance that the Pound appears to be holding its value more readily.
The flash crash – is this a sign of things to come for buying Euro rates?
The flash crash on the Pound created a feeling of déjà vu to many who had seen GBP/EUR rates the morning after the Leave vote in June. I was woken by similar automatic alerts on my phone at 2am essentially saying I needed to get to the office right now.
Pound/Euro exchange rates fell from 1.14 to 1.08 in a matter of seconds as automatic trading algorithms in Asian markets went wrong and led to an unwarranted and hefty wave of Sterling being sold off. Markets have recovered to 1.11 at the time of writing this after gradually creeping upwards and minimizing any losses. In any event, you can view live exchange rates here.
So in reality, without this flash crash GBP/EUR would have barely moved over the past month, compared to the 6% average shifts seen monthly since the beginning of the year.
There have been events which would commonly lead to double digit shifts on Pound/Euro exchange rates in a single day. For example at the end of October growth figures for the UK economy were released showing our first look at how the UK has performed post-Brexit vote, and these were almost double what was anticipated. Normally a piece of news which would be a massive market mover, yet this didn’t register one iota on the Pound’s value.
It seems the market currently has tunnel vision. All other news seems unimportant compared to hints, even glimpses as to what a Brexit may manifest itself as. Insinuations and public declarations from major European leaders and Theresa May give an idea on negotiating positions heading into March 2017 when Article 50 is due to be enacted. We have seen the greatest movement on GBP/EUR exchange rates this month when political news is released. Even the flash crash, though unjustified, was in reaction to some harsh words given by François Hollande, the French President.
How best to approach the markets as we edge closer to the end of the year
During the next five months financial markets will be drip fed information on how pre-negotiations are progressing, and begin to put together an idea of what a British exit from the European Union would look like.
As the above summary states, this current market will appear relatively stable until a sudden news release will impact your budget and buying power for a French property.
Whether you are on verge of signing on a property, potentially submitting an offer, or will be viewing soon, the importance of being in contact with a specialist currency broker to discuss how to safeguard your budget, secure immediately any tempting opportunities which emerge in this hypersensitive market, and remain well-informed of any changes in expectations and market trends, has rarely been higher.
You are also in a more flexible position than many realise.
If you have had an offer accepted, the standard time between this and your completion is around three months. A popular option offered through currency exchange brokerages is called a forward contract. If you make an offer on a property, you do not have to be worried that the exchange rate may be vastly different by the time you come to securing your Euros and completing on your property.
For a small deposit you can fix the rate of exchange for this entire period, with the rest of your Sterling sitting in you bank or waiting to become available from a sale or release from investments. It does not matter how much the markets shift in the meantime, this rate is fixed and guaranteed, allowing you to make an offer with confidence, rather than biting your nails that it can be easily honoured.
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