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Weekly Euro forecast from Rob Hesketh of France Financial and Spectrum IFA

It was quite a different feel to the market this week.  Instead of sterling and the Euro fighting to see which can perform more poorly than the other, we had the reverse, with both performing strongly against the US Dollar.  In the event sterling came out marginally ahead, and we ended up at 1.2220 which is, as you probably noticed, almost exactly where we finished last week.  How can we do so well and yet make no headway?

Good sterling figures

The big news of the week was the UK retail sales surge at about three times faster than was expected in July at 1.1%.  This was well above the predictions which were aiming at a 0.4% rise.  There was also a rise in corporate tax receipts which cut borrowing sharply, as well as better-than-expected factory orders.  All this suggests that the UK recovery remains strong and also saw sterling jump a full percent against dollar and half a cent against euro.

Good Euro figures

Not to be outdone, German economic growth is set to hit 3% as Central Bank revised their 2010 forecasts, apparently Europe’s largest economy is generating its own momentum and they are hoping for ripple effects across other Eurozone countries.  The EU has said that the measures the Greek government have taken to reduce their budget deficit ‘appear sufficient’ to meet this year’s goal.  This is apparently based on the provision that government-spending remains tight.  However they have also released part of the second bail-out amount of EUR9bn worth of Eurozone loans.

What now?

I didn't actually get round to buying any Euros last week, but I still think sterling is riding its luck. The news this week was cautiously welcomed by the markets, but fears that once the spending cuts and tax rises start to take effect, sterling's strength may end and exchange rates could fall.  We could see a reasonable period, say two or three months, of sterling weakness to come, so if you think you might need some funding in that timeframe, I'd look carefully at the rates available now.  I can recommend some very good exchange rate agencies if you're not sure who to use.

A bientot,   Rob

Please note that all these comments are my personal view and do not represent any firm advice by either France Financial or the Spectrum IFA Group.

Contact Rob

Rob Hesketh and France Financial

Rob moved to France in 2003 after working for 30 years in International Banking in the City of London and Brussels.  He joined the Spectrum IFA Group in 2005 and became registered and authorised by the French fiscal authorities in mid 2006.  He is now a partner in Spectrum and looks after client relationships in the South West of France.

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