Mortgages – Where Next?

Mortgage expert Ray Boulger is in the news today making various interesting comments about mortgages. ‘The MPC’s comment about expecting inflation to remain above its target rate for another two years but then fall back to 2 per cent reinforces the view that the next increase in bank rate is still a long way off.’

‘However, this is already reflected in fixed rate pricing and we believe that five year fixed rates continue to be the product of choice for those comfortable with being locked into early repayment charges for five years.’

‘The larger the mortgage the more likely it will be worth paying a higher fee to obtain a lower rate, particularly on a five year fix where the impact of fee once amortised into the rate is much less than on a two year deal.’

Chinese Work Away!

There was an interesting story a couple of weeks ago about a software developer working for a big American company. A security check revealed that he had outsourced his job to a company in Shenyang China and was spending his days surfing the internet and trading on eBay. The un-named worker was paying just a fifth of his six-figure salary for the people in China to do his job for him.

Now I’m not suggesting you copy his example (the employee no longer works for the company) but it does raise an interesting question – are you doing, or paying for work, which could be outsourced overseas very cheaply? If the price of a software developer’s work is a fifth the US price in China, what other work may attract a similar discount?

Fraud Hotline

The Land Registry now has a property fraud hotline as part of its anti-fraud strategy. ‘Properties which are most vulnerable to registration or mortgage fraud are usually empty, tenanted or mortgage-free ones, with owners who do not live in the property at particular risk.’

The fraud line number is 0300 006 7030. The Land Registry is also continuing its trail of a free restriction for absent owners; it’s reported that this has safeguarded some 5,000 properties so far. Find out more at www.landregistry.gov.uk.

Sterling-Euro Updates

Peter Lavelle at Pure FX writes, is sterling set to be the big loser in 2013? I’ve heard several comments to that effect this week as the pound continues its sharp decline, notably against the euro. This week, sterling fell to its lowest point against the euro since October 2011 as investors place their bets as to what’ll happen this year. The general consensus is that, with the US economy picking up, and the Eurozone debt crisis receding, the UK is one of the worst-placed economies. This reflects the fact that the UK contracted –0.3 per cent in Q4 of 2012, putting us on course for a triple dip recession.

What’s going to affect sterling next? This week, there’s a lot of potential for sterling to keep losing out. First of all, Markit’s releases its monthly PMI of the UK services sector. This tells us whether UK services expanded in January and is important because it accounts for 3/4 of UK output. Alas, a contraction of 49.8 is forecast (figures beneath 50.0 signal shrinkage), which would see sterling fall further. In addition, incoming governor of the Bank of England (BoE) Mark Carney will appear before Parliament’s Treasury Select Committee, to discuss his views of UK monetary policy. Now, in recent speeches, Carney has argued that central banks should orient themselves away from fighting inflation so fixedly and focus instead on generating growth. That suggests he’s likely to ramp up the Bank of England’s printing presses when he takes the helm in July and would be sterling negative.

Meantime, the euro once more enjoyed smashing gains against the pound and US dollar this week, hitting 13-month highs against the pair of them. Funnily enough though, you’d be hard-pressed to find what particular announcement caused these gains. It’s not as if the Eurozone is out of recession or that the currency bloc’s members have taken another step to integration. Instead, this climb reflects a widespread view that the worst of the debt crisis is behind us. No longer is there an existential threat of the euro breaking up. That’s seen confidence increasingly return to the Eurozone, with a corresponding surge in the value of the common currency.

After a straight month of gains, I suspect we might begin to see the euro on the back foot before long. For one, French finance minister Pierre Moscovici told television station France 2 this Sunday that “the euro is strong, perhaps too strong in some regards.” This has sparked speculation that the Eurozone might intervene to weaken its currency, to boost exports, just as the UK, US and Japan are doing. The euro could sink as details of a government-wide corruption scandal emerge from Spain. Last week, leading newspaper El País published ledgers which seemed to show Spanish president Mario Rajoy receiving kickbacks stretching back to 1998. If Rajoy resigns over this, it would threaten Spain’s deficit reduction plan.

Weight Loss Madness

If you’re in any doubt about the lengths some people will go to lose weight, then you need look no further than the latest patent applied for by Dean Kamen, who was also responsible for creating the Segway.

Alongside a team from Aspire Bariatics, Kamen has invented a pump that can suck food and drink straight out of the stomach. Apparently, users are able to eat normally (or abnormally, depending on your view) before draining their stomach via a valve, surgically implanted in their abdominal wall. The pump will be marketed as an alternative to the equally unpalatable gastric bypass.

So what does this tell us? Well it reinforces the fact that many people are desperate to lose weight and will do stuff most of us would run a mile from, just to weigh less.  Numerous fortunes have been built on the back of this simple fact and many more will be built in the future. Could one of them be yours? Simpler and less invasive methods of losing weight than this one are available!

Latest Currencies Review

Welcome to the Pure FX account of the latest changes in the foreign exchange rates. This is intended as a brief guide to movements in the exchange rates this week to help put you in the best position for when you exchange currencies.

UK Pound

Pound slides as UK contracts –0.3 per cent in Q4

Poor old sterling! The UK pound shed another two cents against the euro last week, taking it to its lowest point against the common currency since December 9th 2011, as the UK economy contracts in Q4.

The UK shrank –0.3 per cent between October and December last year, more than forecasts for –0.1 per cent, chiefly as North Sea oil production fell. Planned maintenance on ‘Buzzard’, the North Sea’s biggest oil field, overran by two months, knocking –0.2 per cent from GDP according to the Office for National Statistics (ONS). However, even without this, the UK would still have shrunk –0.1 per cent in Q4.

What’s going to happen next?

This now raises the possibility that the UK will re-enter recession, if the economy also shrinks between January and March this year (a recession is officially defined as two consecutive quarters of contraction).

Euro

Euro rises as banks repay LTRO loans early

Elsewhere, the euro jumped against not just sterling but the US dollar this week as the Eurozone’s banks pay back an unexpectedly large chunk of their loans.

This month, 278 Eurozone banks will pay back €137.2bn lent to them by the European Central Bank in December 2011, as part of the ECB’s Long Term Refinancing Operation (LTRO). This beats out forecasts that the banks will repay just €84.0bn in January, and so signals the Eurozone’s financial system is in far better shape than expected.

What’s going to happen next?

Though this news is upbeat, it’s strictly related to the financial system, and so has little bearing on the real economy. In this respect, the Eurozone is still in deep recession, which will limit the euro’s gains going ahead.

US Dollar

Greenback shaped by events elsewhere but green shoots lift US

Last but not least, the greenback gained against the pound but lost against the euro last week as we’d expect from events in the UK and Eurozone. This means the markets all but ignored the brightening economic outlook in the US.

For instance, last month the number of new construction projects hit a 54-month high in the US, of 954 thousand year on year. This means there are 37.0 per cent more construction projects underway now than in December 2011. Meanwhile, Markit’s US manufacturing PMI hit 56.1 in December. This is miles above the 50.0 point that signals growth and so signals a sector enjoying rapid expansion.

What’s going to happen next?

Looking ahead, this good news could cause US dollar weakness, as it contributes to an upbeat global mood and hence risk appetite. (As the global reserve currency, the greenback benefits most when the mood is downbeat, and investors want a safe haven).

Coming Up

Here’s our calendar of the big economic releases that could affect the exchange rates this week.

Wed 30th 13.30 – US GDP (Q4)

Wed 30th 19.15 – US Federal Reserve interest rate decision

Fri 1st 08.58 – Eurozone manufacturing PMI (Jan)

Fri 1st 09.28 – UK manufacturing PMI (Jan)

Fri 1st 10.00 – Eurozone unemployment rate (Dec)

Fri 1st 13.30 – US non-farm payrolls (Jan)

Fri 1st 13.58 – US manufacturing PMI (Jan)

Find out more

With the UK economy flat-lining, and confidence in the Eurozone rising, the pound could yet fall further. To find out how this will impact your foreign exchange transactions, feel free to visit us at foreign exchange specialists Pure FX, email enquiries@purefx.co.uk or call +44 (0) 1494 671800. We’d be delighted to give you an in-depth response to your query.

Holiday Photographer

Ever thought of becoming a holiday photographer? You could be excused for thinking that this opportunity had seen better days. After all, Jessops Photographic went into administration recently, and one of the reasons cited was that almost everyone now has a pretty good camera on their phone. So why would there be a demand for someone to take photographs of you while on holiday?

Well the Smartphone boom has lifted the profile of photography. Instead of holiday photo’s  being things that are quickly scanned before being condemned to a life at the bottom of a drawer, now they’re pasted all over mobile devices, Facebook and other internet  sites. If you care about such things, you want to make sure you look your best.

A growing number of resorts and hotels are now offering photographic services with a professional as an add-on service. It seems that having holiday photographs that are a cut above the norm is the latest ‘must have’ status symbol.

At the moment, this trend is strongest in the United States (I experienced it there myself last year) but there’s no reason why it won’t take hold here. Perhaps something for keen photographers based in tourist locations to think about. The easiest way to start would be to form a strategic alliance with a hotel, theme park, tourist attraction or resort.