Pure FX Commentary

The pound enjoyed a great April, hitting multi-month highs against the euro, US dollar, Canadian dollar and Aussie. This is thanks to the UK dodging a triple-dip recession.

The euro looks set to fall in May as the European Central Bank has cut interest rates to a 0.5 per cent record low while the Eurozone recession is now forecast to extend into 2014.

The US dollar could strengthen as the US created 165,000 new jobs last month, 20,000 more than forecast, while unemployment fell -0.1 per cent to 6.5 per cent.

The Australian dollar is tipped to decline this month, as the mining boom officially turns kaput, while the RBA looks set to cut interest rates to an all-time low of 2.75 per cent.

Sterling Overview

The pound enjoyed a fantastic April, reaching two-month highs against the US, Australian and Canadian dollars, and a three-month high against the euro. Why? Because, against all odds, the UK avoided a triple-dip recession, instead expanding a surprise +0.3 per cent.

Moreover, from here the pound could continue to reach fresh heights. This is because:

With the triple-dip out of the way, the outlook for the UK is far brighter. This could continue to lift the pound.

With the UK economy in growth-mode, the Bank of England is unlikely to print more money. That will send sterling higher too.

The Eurozone is in worse shape than ever with its recession now set to extend into 2014. That will make the pound stronger, considered a safe haven?

Therefore, don’t be surprised to see the pound to continue to rise in May.

Euro Update

The pound hit its highest point against the common currency in three months in April and, moreover, could continue to climb. This is because:

The European Central Bank cut interest rates to 0.50 per cent this month. This makes the euro less profitable and so could weaken the currency.

The UK expanded +0.3 per cent in Q1 while the Eurozone recession is deepening. This could bring the euro down too.

Therefore, whist the euro remains relatively strong against the dollar this may not continue.

US Dollar

The pound enjoyed strong gains against the US dollar in April, hitting its highest point since early February. However, it’s unclear if sterling will continue to gain in May. This is because:

On the one hand, the Federal Reserve said this month that it may ‘increase’ its stimulus. This could weaken the greenback, because it involves printing more money.

On the other hand, the US created 165,000 jobs in April, 20,000 more than forecast, while unemployment fell to 7.5 per cent. This could strengthen the dollar.

Therefore, the pound may have reached its peak against the US dollar for the moment!

Australian Dollar

Sterling hit its highest point against the Australian dollar in two  months in April, gaining +3.44 per cent over the month. Moreover, it could continue to climb. Why? First, because the economic mood in Australia is quickly darkening, with some economists talking of a ‘protracted recession’ as the mining boom ends. Second, the Reserve Bank of Australia could soon cut interest rates to an all-time low of 2.75 per cent to support Australia’s economy.

New Zealand Dollar

Sterling stood still against the New Zealand dollar in April, gaining just +0.25 per cent across the month. However, odds are high the kiwi dollar will soon rise. Here’s why. The Reserve Bank of New Zealand is tipped to raise interest rates above 2.5 per cent next month to squelch an incipient housing boom. That will lift the kiwi dollar.
Second, New Zealand’s exports to China are booming, having risen 32.0 per cent in March compared to 12 months before. That too could lift the New Zealand buck.

Canadian Dollar

The pound hit a two-month high against the Canadian dollar in April, climbing +2.01 per cent across the month. Moreover, it could continue to climb in May. First, this is because the Bank of Canada is no longer set to raise interest rates above 1.0 per cent as had been forecast. This could bring the loonie dollar down. Second, Canada’s growth outlook for 2013 has been cut -0.3 per cent to just 1.5 per cent by the IMF. This too could weaken the Canadian dollar.

Brazilian Real

The real gained +1.01 per cent against the US dollar in April. Furthermore, it could continue to gain. Why? Well, first, because the US expanded less than forecast in Q1, at just 2.5 per cent. This has weakened the greenback. Second, Brazil’s central bank has begun what some see as a cycle of interest rate rises, increasing rates +0.25 per cent to 7.5 per cent in April. This could lift the real.

Turkish Lira

Turkey’s lira climbed +0.86 per cent against the US dollar across April and looks set to continue to climb. First, this is because the US expanded -0.5 per cent less than forecast between January and March, at just 2.5 per cent. That will weaken the buck. Second, Japan’s decision to print tens of billions of yen to beat deflation means money is pouring into Turkey. That should lift the lira.

Your Free Forecast

Get an exchange rate forecast from our friends at Pure FX. ‘To find out what we think will happen next to the exchange rate that is of most interest to you (UK sterling to euro to the US dollar to the Brazilian real), visit us at foreign exchange broker Pure FX, call us +44 (0) 1494 671800 or email back.  We’d be delighted to give you a free exchange rate forecast’.

The Delivery Stop

We’ve covered food delivery services here before, but I just heard a piece on local radio this morning, about two young guys who have started a delivery business with a twist.

The delivery stop only launched in January 2013, but they have already opened two new branches away from their home city of Sheffield. The idea is simple. Fast food companies like Macdonalds, KFC and Nando’s don’t deliver. Delivery Stop take orders over the phone, send a driver to the outlet and deliver the hot Food to a customers door within 45 minutes. Aimed at the student market, the service also includes other local restaurants popular with young people.

Delivery Stop charge a delivery fee and I’d imagine they also get a commission from some of the smaller restaurants they deal with. The two guys on the radio this morning claim the business is booming with over 900 calls taken on their very first day!

Could you copy this business in your area? If you live in a major town or city, the answer is almost certainly yes.


The Virtual Farmers Market

Farmers and small scale food producers usually have to rely on wholesale distributors to make the link to wholesale buyers like restaurants and specialist food retailers. In New York, New Jersey and Conneticut, there’s now a different solution. Farmers Web allows producers to sell their produce to restaurants and shops direct. It’s a low cost virtual farmers market.

I know little about the market here in the UK, but I’d imagine small scale food producers face a similar marketing problem. Could you set up a website like Farmers Web to help them get their goods to  the restaurant and specialist retail market? If this works in the US, I can see no reason why it wouldn’t work here too.

Property Alert

Welcome to today’s news and views…

US – More Good News

According to the latest quarterly report from the National Association of Realtors (NAR) in the US, the median existing single family home price rose in 133 of 150 metropolitan areas in Q1 2013. ‘The supply/demand balance is clearly tilted toward sellers in a good portion of the country. Inventory conditions are expected to remain fairly constrained this year so overall price increases should be well above the historic gain of 1 to 2 per cent above the rate of inflation. If home builders can continue to ramp up production, then home price growth is expected to moderate in 2014.’

‘Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum. Even with rising home prices, there is still plenty of buying power in the market. Historically low mortgage interest rates and home prices that remain well below their peak mean most buyers can purchase well within their means, assuming they meet ongoing stringent credit standards.’ More to come.

Hot Tipped Markets

Talking commercial real estate now, we note that CBRE is stating that Dublin, Madrid and Milan are ‘the real estate markets to watch…as international investors search for higher yields’. CBRE predicts that ‘safe haven’ markets such as London will see total returns of between 3 to 8 per cent a year over the next five years. Recovering markets such as Dublin, it says, should see total returns of more than 9 per cent a year over that time. These markets are suited, please note, to ‘investors with the appetite to take on incremental risk’.

‘For some time there have been mentions of the ‘wall of money’ waiting on the sidelines for real estate. 2013 is likely to be the year where we see investors coming off the fence and deploying capital into locations such as Dublin and, further down the line, potentially Madrid as well. Over the next five years, we expect returns on prime assets in recovering markets and even good quality secondary in places such as the UK to exceed those in safe haven markets.’

Asia Prime Properties

A new report from Jones Lang LaSalle suggests that prime property prices in Asia, with the exception of Hong Kong and Singapore, are rising. Prices across the nine markets were up 2.2 per cent on a quarter-on-quarter basis and 6.1 per cent year-on-year. Indonesia led the way with prices in Jakarta rising 8.7 per cent between Q4 2012 and Q1 2013 and 32.9 per cent year-on-year.

Take note though that ‘falls are coming where governments have introduced measures to dampen market prices’. Prices are expected to drop by some 5 to 10 per cent in Hong Kong and Singapore this year. Jones Lang LaSalle in Hong Kong reports, ‘Unfortunately, with the current government continuing to adopt a heavy-handed approach in setting policy, volumes and prices are likely remain under downward pressure over the short-term.’ More to follow.