Posted by Sokoorway at 10:52 PM
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A report by the BBC which stated two thirds of European economists
surveyed expect Greece to default on their debt.
Last year such an announcement would have had the markets in absolute turmoil, indeed much
of last years weakness on the euro was due to the debt crisis.
This year despite the well publicised problems in Portugal, Ireland, Greece and Spain the
Euro remains a very unattractive prospect for those looking at buying overseas property.
This is due to a number of factors:
- Economic Outlooks - The economic outlook for the Euro has improved this year with
enouraging signs in manufacturing and factory orders. Unemployment is falling and the
overall picture remains bouyant despite the problems of the PIGS. The UK is suffering
from very low growth and the immediate future does not look rosy either. It could be
months or a year before the economy is deemed strong enough to be able to handle a rate
hike and even then if the Euro has already had one, it is unlikely to be a major mover.
– EFSF – The European Financial Stability Facility is designed to act a safety net for
indebted European nations. The fund has recently been made permanent and has given the
markets the confidence that the ECB and stronger Eurozone members are serious about
coming to the financial aid of the weaker members – a criticism levied at many members.
As discussed European Debt concerns had been a major weight on the euro last year but now
the issue is well known and appears to be being dealt with confidence has been restored.
It is worth noting that longer term this is likely to be the issue that could present
Euro weakness as concerns arise over the inability of the indebted nations to repay their
debts.
– Interest Rate Decisions – The UK looked almost certain to have a rate hike in the first
quarter of this year and the pound made strong gains on the euro as investors positioned
themselves for the event. We then had a barrage of data releases showing that in all
probability the UK wasn't ready for a hike and as such these positions were unwound and
led to sterling weakness. Conversely the Eurozone has been floating the prospects of an
interest rate hike as soon as next month. With unemployment falling it appears the Eurozone
may have turned a corner and will be the first to stomach a rise in the base rate. This
has compounded the problems for the GBPEUR rate as investors have taken up stronger
positions on the Euro. The US economy whilst growing is still incredibly weak and due
to the amount of cheap loans issued to stimulate recovery cannot afford to go raising rates.
They are still administering the latest round of Quantitative Easing and will need to
fully assess the effects before committing to a rate hike.
surveyed expect Greece to default on their debt.
Last year such an announcement would have had the markets in absolute turmoil, indeed much
of last years weakness on the euro was due to the debt crisis.
This year despite the well publicised problems in Portugal, Ireland, Greece and Spain the
Euro remains a very unattractive prospect for those looking at buying overseas property.
This is due to a number of factors:
- Economic Outlooks - The economic outlook for the Euro has improved this year with
enouraging signs in manufacturing and factory orders. Unemployment is falling and the
overall picture remains bouyant despite the problems of the PIGS. The UK is suffering
from very low growth and the immediate future does not look rosy either. It could be
months or a year before the economy is deemed strong enough to be able to handle a rate
hike and even then if the Euro has already had one, it is unlikely to be a major mover.
– EFSF – The European Financial Stability Facility is designed to act a safety net for
indebted European nations. The fund has recently been made permanent and has given the
markets the confidence that the ECB and stronger Eurozone members are serious about
coming to the financial aid of the weaker members – a criticism levied at many members.
As discussed European Debt concerns had been a major weight on the euro last year but now
the issue is well known and appears to be being dealt with confidence has been restored.
It is worth noting that longer term this is likely to be the issue that could present
Euro weakness as concerns arise over the inability of the indebted nations to repay their
debts.
– Interest Rate Decisions – The UK looked almost certain to have a rate hike in the first
quarter of this year and the pound made strong gains on the euro as investors positioned
themselves for the event. We then had a barrage of data releases showing that in all
probability the UK wasn't ready for a hike and as such these positions were unwound and
led to sterling weakness. Conversely the Eurozone has been floating the prospects of an
interest rate hike as soon as next month. With unemployment falling it appears the Eurozone
may have turned a corner and will be the first to stomach a rise in the base rate. This
has compounded the problems for the GBPEUR rate as investors have taken up stronger
positions on the Euro. The US economy whilst growing is still incredibly weak and due
to the amount of cheap loans issued to stimulate recovery cannot afford to go raising rates.
They are still administering the latest round of Quantitative Easing and will need to
fully assess the effects before committing to a rate hike.
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