8570 Pound hits all time low against the Euro

If you're worried about the UK buyers bailing maybe check the sort of homes they buy. In the areas near the airport the budget airlines fly into.

But isn't a bigger issue what ever is happening in the UK housing market? 7K doesn't mean much if your own home is going up. It's only if the UK market isn't letting you pull money out that it might matter.

We're on the opposite side of the coin. Having agreed a price on our villa a few weeks ago, we've UP an extra £5k in that short time :winki:

The problem for the banks is they need to mark to market. Even with no defaults the lack of buyers for the paper is causing them to take large write offs. UBS supposedly was forced to make large sales of paper last week at low prices. The stuff has value but nobody wants to buy it right now.

In the end it'll be the same thing that always happens. Vultures who don't need to worry about things like market prices will scoop up the paper and hold on. In a year or five they'll make out well. You'll hear the whining from the same people who refused to buy the cheap paper about the obscene profits the vulture funds will make.

[quote=tennaval;80404]... For those wanting to settle here and seeking value I would advise finding a so called "distressed sale". A nice restored house in a popular area owned by inglese who for one reason or another are in desperate need to sell to return home. Ignore the listed price when making an offer and above all (as youre all English) arrange to pay in sterling![/quote]

:veryconfused: Mmmm.... it would sound as a good idea; however, I do not know whether Italian notaries would be able to accept that type of settlement in sterling against euros. Particularly nowadays with tighter controls over the money handled in any operation.

[quote=NickZ;80407]The problem for the banks is they need to mark to market. Even with no defaults the lack of buyers for the paper is causing them to take large write offs. UBS supposedly was forced to make large sales of paper last week at low prices. The stuff has value but nobody wants to buy it right now. [/quote]

I understand what you are saying but much of the stuff you talk about having value is secured against assets no-one wants (i.e. US houses). Perceived value can disappear in an instant when the king's new clothes are seen not perceived. Marking to market also means that the more the underlying house prices fall the more the banks losses increase. Catching a falling knife is very dangerous and a lot more people will be hurt than will make money.

I personally think that in 10 years we will look back on the subprime crisis and see is as a seismic shift that has changed the world's economy probably in favour of Russia and the US much as I hope I am wrong.
Another thing that in my opinion has not been factored into the Italian property market is the impact of possible long term high oil prices on low cost airlines. Remember a year ago when everyone was scoffing at the idea of oil over $100. If it stays over $100 there will be significant changes and a lot of poor performing low cost routes will be cut.

The euro is in a strong uptrend vs the pound at the moment but is getting a little ahead of itself and with the dollar's recent fall it may start leveling out or pulling back a little in the short to medium term. But then again it may keep going up pull back and then keep going up. Oh how I wish my X-Ray vision into the future were working. Accursed Lex Luthor ;)

The graph you attached, patch, is a good example of a journalistic habit that irritates me. At first sight, that squiggly line heading ever-upward looks so damned dramatic, but then one notices that the vertical scale runs from 0.65 to 0.75.

Of course, a journalist wouldn't stick the wiggly line on top of a graph that has a baseline of zero because people seeing it would likely say, "Hmm, so the Pound has fallen a bit against the Euro," shrug and turn the page. (By "people", of course, I mean normal folk; not those who put a new Ferrari in their driveway every year by gambling every day on whether an exchange rate will rise or fall by 0.001% over the next hour.)

My income is in GBP and my expenditure is in Euros. So, yes, my income has fallen. I have less money to spend this month than I did a year ago, but it's hardly a disaster. It's certainly doesn't feel anything like eqivalent to the worries I felt due to negative equity during the John Major years.

I do genuinely feel sorry for anyone whose dream of living in Italy collapses because the exchange rate changes for the worse by 10% or the putative value of their house in the UK rises by less than 20% in a year. But then it seems to me that anyone who budgets [I]that[/I] tightly should know they're running a very real risk of getting nailed by [I]something[/I]: if not a shift in the exchange rate, then a rise in oil costs, an encounter with dodgy tradesmen, personal illness or a lightning strike.

I don't know much about economics, but the mantra that goes, "The value of your investment may go down as well as up," is firmly lodged in my brain.

Al

Graphics are generally used to illustrate the case in point. Personally I feel that a 12% drop in 6 months is dramatic.

You are fortunate to have established yourself in Italy already but a weakening pound will affect many people, myself included regardless of how well we have budgeted.

The issue for many of us is if the Euro will keep getting stronger against the pound or dollar.

Since forex charts do not run from 0 the best I can do I show you a long term euro chart where you will see that the recent move is not a normal turn over the page wiggle.

As the heading of the thread says: Pound hits an all time low against the Euro.

I think the €'s strength is largely a reaction to economic woes in the US & a corresponding shift of global investment away from the $ and into the €.

The Euro's emergence as a safe haven for investment funds is a default situation, as it's the only real alternative global currency to move money into if the $ is too weak to fulfll it's traditional role.

The eurozone isn't really doing anything in economic terms to justify it's currency's strength, it's shining in reflected glory.

Sterling is a pretty minor currency these days, and while the UK is now undergoing the start of the long awaited price correction in its housing market, its economic fundamentals otherwise are probably in as good or better shape than the majority of mainland Europe's.

So, the € is at historic highs against both £/$. I'd imagine that the $ will bounce back eventually, probably after the presidential elections give analysts some stability as a basis for optimism; whether the £ will also recover is less clear.

Bottom line though is that if you really believe in living in Italy - as a life choice, not just as an investment - you'll press on with your house purchase, possilblytrading down slightly on the location/size/state of property in line with your currently reduced buying power. If you do that, you'll at least have a Euro denominated asset that will make you less prone to the vagiaries of currency fluctuations ongoing - if the pound DOES keep sliding, a house in Italy, bought today, would still be the best investment you ever made.

does anyone actually see the point of retaining sterling anyway?

I guess, given the purpose of this forum, most here would be glad if the UK moved to Euros, as it would remove at a stroke the ongoing FX planning problems.

Would the UK suffer as a result? I can't see it; our trading partnners are predominantly the EU countries and the USA. The former would become more profitible & stimulate growth; the latter would have opposing effects on imports & exports but that's just swings and roundabouts and the balance will continue to change regardless based upon the relative strenght of the $ vs. either £ or € (and I'd back the € as a more stable long term bet).

OK, so we lose the ability to tweak our own interest rates to manage our inflation, unemployment, investment climate etc. but the ECB would still do that for us with some UK representation, just as it does for Germany, France etc, and there are other political routes available to the UK to mitigate loss of direct BoE control.

So, basically I reckon that there are lots of macro-economic reasons that those with a vested interest in the status quo always trot out to support the £, but I don't think they're either compelling or insurmountable - I think they are in the main just raised by euro-sceptics as a bulwark against tighter UK integration to the EU.

The one potential "gotcha" would be the setting of the rate at which sterling got exchanged when we entered Euroland - the experience of the other EU members as they went through that pain (price hikes & loss of effective capital value) probably puts many here off the prospect.

However, if you believe (as I do) that an eventual move to the Euro is inevitible, then the sooner the better, as Sterling's value will just continue to erode gradually until that happens. Yes there will be pain - but better a 10% hit now that a 20% one in 5 years time?

On the other hand, think of the population of the UK - one of the most widely travelled of nations for both work and leisure. The diaspora is huge in both volume and area, with Europe a significant & increasing focus. The real impact of a switch to € would be felt every time we went on holiday, bought foreign goods etc. convenience & spending power would both be maximised, and we'd finally stop lining the banks pockets with the outrageous commissions and shyster exchange rates they charge currently.

Any takers to enlighten me on the upside to retention of Sterling?

As someone on here recently wrote about a poll that was taken in the uk , about would people prefer the euro, 86 percent said that they are more then happy with there giro...............grin

[quote=pigro;81137]does anyone actually see the point of retaining sterling anyway? Any takers to enlighten me on the upside to retention of Sterling?[/quote]

Hi Pigro.

No, on both counts.

Whether we like it or not, we're Europeans, always. The sooner UK joins the Euro the better it will be for all.

The Cypriot Pound was a very strong currency as many of you may know. On the 1st Jan 2008 Cyprus adopted the Euro and in IMHO probably had an effect in strengthening the Euro.

The Sterling too is a strong currency and if the UK was to adopt the Euro, The USD would take a nose-dive and somehow I don't think the Federal Reserve or our Banks would be too keen either.

Think how much revenue the our banks would loose as there would be no dreaded commissions on FX transactions.

The Standard or was it the Mail, carried out an experiment a few years ago before the Euro was introduced.

One of their journalists was given £100 and he had to exchange the money in, I think, about 10 European countries.

When he returned to the UK and exchanged it back into Sterling, he had about £65.00 left over.

So I say bring on the Euro. Yesterday.

#1

I remember talking to an Italian friend when Italy changed from Lire into Euro, and I was pointing out the advantages of not having to change Lire into DM or FFr and paying the banks an exchange rate commission. And I was also singing the praises of free trade across boundaries.

His view (probably borne out) was that the banks would just get money from us in other ways; and if the government couldn't tax you on import duties it would simply find something else to tax you on! Universal truths. Thus, in his view it was all irrelevant nonsense.

I agree that the UK should adopt the Euro.
I am constantly amused by people who say 'the pound is British and we should keep it'. They can rarely explain why, if it is British, Pound =£, shilling = S and Pence = D. Of course £SD is a Roman introduction in the first place; librae, solidi, denarii and was used very effectively all over the Roman world. Really the £ was the € of its day.

[quote=Charles Phillips;81149]His view (probably borne out) was that the banks would just get money from us in other ways; and if the government couldn't tax you on import duties it would simply find something else to tax you on! Universal truths. Thus, in his view it was all irrelevant nonsense.[/quote]

Charles, the banks may well try to get your money in other ways, but it's then down to the customer to minimise/avoid that - which is possible, even in Italy, but more so in the liberalised UK financial market (which I was referring to).

The govt. will indeed arrange to take what it needs from the taxpayer, creating new taxes if required to replace lost revenue - but that burden would tend to be spread across the whole population rather than targeting only those with the need to travel/transact abroad.

Dunno about your friend (did he travel much?), but it's pretty relevant to many in the UK, innit?

Well like (I suspect) most on this forum I'd be pleased as punch if we joined the Euro, but we are in the minority of UK citizens, if the papers are to be believed. Why is there not wider positive discussion about it? I recently saw an edition of "This Week" - the political discussion programme hosted by Andrew Neil with Michael Portillo and Diane Abbott - that had a feature about the euro debate and the pro Euro position was put by that great economic theorist, Julian Rhind-Tutt, from the Green Wing. I ask you...

"if the papers are to be believed" .... indeed! If the redtops would stop whipping up jingoistic fervour amongst the masses, we'd probably have the Euro already by now.

ps - who was the "anti" camp's spokesman on This Week ... Dr. Alan Statham? :-))

Nearly. If I remember correctly I think both Michael Portillo and Diane Abbott were against joining the Euro. Certainly Portillo was against.

I seem to recall Neil asking Rhind-Tutt whether he thought the pro euro lobby could win a referendum and Rhind-Tutt (being merely an economist and not a politician) answered honestly that he thought not. So that's settled then.

Hello,

For the moment many consider the difference in exchange rates a worthy factor, however I wonder if its actually possible to join the Euro later, when the £ hits a value which is equal or possibly slightly lower than the Euro.

I dont think we are a minority, but it seems the antis are the only ones listened to for some reason.

Whether £ or Euro, it is still the country it is, but there are some hard-core right wingers who imagine it wont be I suppose, hard to tell-the thing is surely to aim for what is best for Blighty, rather than keeping up traditions?

If the Euro was in place surely there would be benefits? What of tourism increase? For the moment it is costly for all in a sense, but if it wasnt-that is, if all was in Euros?

So long as we are allowed in when the £ drops right down, its much of a muchness....and inevitable.

Zac

Ah, Robini, you are thinking like a British (...now, I wonder if I should have used the word English there....) politician. When the Sterling/Euro rate is parity I think even the red-tops will start braying the advantages of converting.

[quote=AllanMason;80759]......

I do genuinely feel sorry for anyone whose dream of living in Italy collapses because the exchange rate changes for the worse by 10% or the putative value of their house in the UK rises by less than 20% in a year. But then it seems to me that anyone who budgets [I]that[/I] tightly should know they're running a very real risk of getting nailed by [I]something[/I]: if not a shift in the exchange rate, then a rise in oil costs, an encounter with dodgy tradesmen, personal illness or a lightning strike.

I don't know much about economics, but the mantra that goes, "The value of your investment may go down as well as up," is firmly lodged in my brain.

Al[/quote]

I totally agree with your comments. People should be more careful about their decisions. A beautiful dream can become an awful nightmare if you are not careful.

But - Gala - Allan's comments were solid 'good sense'. Now you are introducing the 'emotional' stuff with words like 'dream' and 'nightmare'. You have put your finger on the hype surrounding 'gotta get one of those' (ie 'dream house abroad') 'cos "it'll make money". It might not: to paraphrase the wise mantra 'the value of your investment...is potentially mired in the vagaries of a hedge fund punter'. I really do not lack sympathy for anyone who has had a 'dream' shattered, but that is what it was - a dream.

its of course correct that no matter what the rate eventually settled on for sterling to enter the euro zone, Brit's with only UK assets will not be adversely affected by the specific rate chosen - everything will still cost the same for them in relative terms** (ignoring optimistic retail rounding for now). However, our property and businesses may start to look like a bargain to some of the richer Europeans with euro funds to invest, which could itself lead to some Brit's in the home counties being priced out of their own housing markets, just like they've been doing to the French for decades :-)

I'd also point out that there is no rational need for convergance of £:€ at 1:1 in order to trigger our entry to the Euro ... in fact it would be economic lunacy to await that arbitrary point just so that old Doris didn't need to run a conversion in her head when paying in Euros instead of pounds. The rate would be fixed according to the true relative currency stengths at the time of entry as per the international markets (or they could just use the Big mac index!).

** (edit - assuming the rate is appropriate to the actual relative strengths of the two currencies at the time)

[quote=Charles Phillips;81197]But - Gala - Allan's comments were solid 'good sense'. Now you are introducing the 'emotional' stuff with words like 'dream' and 'nightmare'. You have put your finger on the hype surrounding 'gotta get one of those' (ie 'dream house abroad') 'cos "it'll make money". It might not: to paraphrase the wise mantra 'the value of your investment...is potentially mired in the vagaries of a hedge fund punter'. I really do not lack sympathy for anyone who has had a 'dream' shattered, but that is what it was - a dream.[/quote]

I'm afraid that the "emotional stuff", as you put it, tends to be more important for many people than the sensible approach. We only have to read through many of the mails in this forum. I also feel sorry for those who are caught in this trap; however, my advice is to think twice before making any definite moves.

[quote=Charles Phillips;81197]But - Gala - Allan's comments were solid 'good sense'. Now you are introducing the 'emotional' stuff with words like 'dream' and 'nightmare'. You have put your finger on the hype surrounding 'gotta get one of those' (ie 'dream house abroad') 'cos "it'll make money". It might not: to paraphrase the wise mantra 'the value of your investment...is potentially mired in the vagaries of a hedge fund punter'. I really do not lack sympathy for anyone who has had a 'dream' shattered, but that is what it was - a dream.[/quote]

[COLOR=black]I suppose that every idea starts out as a dream. The key is to shepherding it through the pitfalls of reality to fruition which a lot of people do not understand that they need to do.[/COLOR]

Very interesting interview with George Sorros and others on radio 4 this morning.

This is the link for the podcast.

[URL]http://downloads.bbc.co.uk/podcasts/radio4/today/today_20080123-0752.mp3[/URL]