Streetwise Property Alert 23rd January 2014

London starter BTLs, under 130k and ready tenanted? Be quick! Investing In 2014 seminar on 1 February? Be quick! The ‘Crystal Ball’ article by Peter Lavelle of Pure FX? Read on…

Crystal Ball-Time

Santa’s been and gone, the Christmas cake has been eaten up and 2014 is upon us. This, of course, begs the question, what does this New Year have in store for the foreign exchange rate? Well, as ever, we can’t tell you for certain, but we can gaze into the Pure FX crystal ball, to try to gain an inkling of what may happen to the major currencies this year. Read on for our thoughts.

Sterling

Sterling may well be the juggernaut of 2014, the currency that little baby currencies look up to and think “That’s what I want to be when I grow up”. Which is, of course, our way of saying that the pound looks set to strengthen across the board this year. Why? Because the UK’s economic recovery looks set to continue in earnest. For instance, the British Chamber of Commerce reported that UK businesses are more upbeat now than before the financial crash. And just as a rising tide lifts all boats, so a UK economy at full-throttle looks set to lift the pound.

That said, the road facing the pound in 2014 isn’t completely pot hole-free. For one, there’s the quite real risk that the UK’s economic comeback will prove unsustainable. This may happen because, for the last six months, the UK’s economic revival has been driven by people spending more, in spite of the fact that wages in the UK haven’t gone up. That can’t go on forever. Second, there’s also the risk that the Bank of England will hold interest rates down, in spite of the UK economy’s new-found vim and vigour. So while the pound may rise, it’s not set in stone!

Eur0

If you were to ask the euro whether it were a man or a mouse in 2014, it would reply with a timid ‘Squeak’. This is to say, the common currency looks to decline, a lot. How come? Well, first, because the Eurozone is still waist-deep in an economic quagmire, having shrunk some -0.4 per cent last year. More importantly, however, is the fact that prices in the currency bloc have risen less than 1.0 per cent for three months now, raising the dreaded threat of deflation. Deflation is what’s led to Japan’s economy to stagnate since the 1990s, and would weigh heavily on the Eurozone, and the euro.

US Dollar

Ambrose Evans-Pritchard, economist for The Telegraph, has called 2014 ‘the year of the all-conquering US dollar’. This is to say, he expects the greenback to climb, big time. Why? Well, because since September 2012, the Federal Reserve has printed vast, vast sums of money to lift the US economy, though this has had the simultaneous effect of devaluing the buck. Now, however, America’s economy looks better, the Fed is cutting back its stimulus, and that should set the US dollar flying like a firework on Guy Fawkes’ Night, as it’s no longer weighed down.

Australian Dollar

The Australian dollar fell as though pulled by an exceptionally strong force of gravity last year, and 2014 doesn’t look set to be any different. Why? Because, bereft of its mining boom, Australia’s economy now looks as bare as a Christmas tree on Boxing Day. For instance, Toyota, the last car manufacturer with a factory in Australia, is considering shutting up shop. Moreover, the Reserve Bank may cut interest rates below the emergency levels seen during the financial crash. Given that, it may be all down for the Aussie!

New Zealand Dollar

Kiwi dollar, break out the electric guitar and drum kit! The New Zealand dollar is set to rocket this year, because, as HSBC’s Paul Bloxham predicts, ‘New Zealand will be the rock star economy of 2014.’ Why? Well, first, because the reconstruction of Canterbury, New Zealand’s second biggest city, after its 2011 earthquake, will provide a big economic boost. Second, New Zealand is set to export whacking great quantities of dried milk to China which will lift New Zealand just as the mining boom lifted Australia. With this in mind, it’s best foot forward for the kiwi!

Canadian Dollar

If there’s one currency set to fall in 2014, it’s the embattled loonie! The Canadian dollar fell -9.64 per cent versus the pound last year and that trend now looks set to extend. This is because, much like the UK, Canada is looking for an economic rebalancing that’s yet to emerge. Canadian households are up to their eyeballs in debt, meaning they can no longer fuel growth, yet Canada isn’t exporting more. That then is a recipe for stagnation! Moreover, the Bank of Canada in fact wants to weaken the loonie dollar too, to make Canada’s goods cheaper overseas.

So, that’s what’s in store for the foreign exchange rate in 2014…we think. If you’d like to get a more personal forecast for the foreign exchange rate for this year, and learn how this will affect your money transfers, feel free to call +44 (0) 1494 671800 or email enquiries@purefx.co.uk. We’d be delighted to answer your questions.

All for now, but do get back to us…London starter BTLs…Investing In 2014 seminar…free advice from Peter at Pure FX.


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