Sterling rose to an eight-month high due to dollar weakness and after Federal Reserve Chairman Jerome Powell said on Thursday that the Fed will tolerate inflation above 2.0%. This gave investors hope that the Fed will not try and control economic growth, something that could hurt the US dollar in the near future. On the other hand, on Friday, after Bank of England Governor Andrew Bailey’s speech, the pound remained unmoved. Both Bailey and Powell gave their speeches at the Jackson Hole central bank symposium which was held online this year rather than at the usual ski resort in Wyoming.

Fed’s decision marks a significant shift in monetary policy

The Federal Reserve has approved a significant change in the way it sets its interest rates by abandoning the usual practice of raising them to control higher inflation, something that will leave US borrowing costs extremely low. By signalling that it wants inflation to rise moderately above its 2% target, the Fed confirmed that inflation targeting in a world of lower interest rates is a thing of the past.

Andrew Bailey’s speech

On Friday, the Governor of the BoE delivered his keynote address to fellow central bankers online and not from the actual ski resort in the Grand Tetons where the conference was traditionally organised since 1982.

In his speech, Bailey said that central banks have a lot of strength to use quantitative easing to manage crises, such as Covid-19. As he noted characteristically, “Go big (and fast) or go home.”

The Bank of England governor did not provide details over short-term policy or on the UK economic situation, but he did reassure the financial community that the Bank will be able to deal with future crises: “We are not out of firepower by any means, and to be honest it looks from today’s vantage point that we were too cautious about our remaining firepower pre-Covid. But, hindsight is a wonderful thing when you have it.”

He also said that the Bank won’t seek to restrict monetary policy until there is significant economic progress: “The committee does not intend to tighten monetary policy until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably. This important step is intended to ensure monetary conditions do not tighten prematurely when there are some initial signs of an economic recovery.”

According to Bailey, QE will be “more long-lived” and that the Bank has the power to fight recessions. In regard to Jerome Powell’s comments from yesterday, Bailey said that these suggest that flexibility can be useful for monetary policy and that a different exchange rate environment could justify different approaches.

The Bank of England increased quantitative easing by £745 billion in June, and in March it cut its main interest rate to a record low 0.1%. A paper with the Bank’s conclusions will be published alongside Bailey’s speech.

Are you Transferring funds abroad?

Whether you are sending money to family and friends, buying a property or paying your children’s tuition fees, Universal Partners FX are the leading foreign exchange experts who can ensure you get the best rates and transfer your money safely, fast and efficiently. With state-of-the-art software, a dedicated team of currency brokers, and friendly customer support, UPFX can offer peace of mind, transferring your funds securely and in the most transparent and professional manner.

Get in touch with Universal Partners FX to learn more about transferring your funds overseas.

Plans for buying property may have been postponed for a while due to the Coronavirus lockdown restrictions, but as these begin to ease, Brits’ interest in foreign property has been reignited. Now cities in such European countries as Spain, France, Italy, Portugal and Greece are sought after, as Brits’ love for warm climes and sandy beaches has been rekindled.

Costa del Sol in Andalusia, southern Spain, has always been one of the most sought-after locations for Brits and will continue to remain one of the most desirable places for property investment.  While the real estate market has suffered considerably during the coronavirus crisis, since 18th May when viewings have been permitted again, there has been an increase in requests, boosting confidence that the real estate market will undergo a quick recovery.

Costa del Sol

Famous for its beautiful beaches, art and culture, amusement and national parks, the birthplace of Picasso has always been among Brits’ favourite places, both for their holidays, but also for living and buying property.

Its beauty and popularity have not faded due to the pandemic. Instead, luxury villas and high-end developments in hot spots have retained their value. Other areas might become even more overpriced, while other less sought-after locations might have more realistic prices. According to Olive Press, “when it comes to new developments along the Costa del Sol, again, this wonderfully touristy area ensures a healthy outlook. The construction industry is seeking help to ease it through these difficult times, with calls to rethink new construction tax and bureaucratic processes.”

What to consider

  • Prices and Currency Volatility: The cost of a European property in Sterling can change drastically due to currency volatility as a result of political, economic or other events such as the current pandemic. Markets will always be moving, and prices will remain unpredictable, especially with Brexit uncertainty, the Bank of England’s possible move into negative interest rate territory and the increasing worries about the slow economic recovery.
  • Brexit: This is another topic that is likely to concern home buyers as there might be significant changes in regulations including the stamp duty and increased taxation. Despite the uncertainty, UK citizens will be able to buy homes abroad and live there. You will be able to stay, if you are legally resident in Spain before the transition period ends on 31 December 2020, but you will need to register as a Spanish resident if you want to stay in Spain for more than 3 months. If you are living in Spain before 1 January 2021 and register as a resident after 6 July 2020, you will be issued with a biometric residence card (Tarjeta de Identidad de Extranjero). If you move to Spain after 31 December 2020, there will be different immigration requirements.
  • Your strategy when transferring funds: Since you will be transferring a large amount of funds, you will need to consider how much that will worth after the exchange. Getting in touch with a currency specialist such as Universal Partners FX can help you navigate the current market while taking into consideration your specific needs, goals and your budget.

If you are considering buying your dream home in Spain, get in touch with Universal Partners FX so you can have peace of mind when sending a large amount of money overseas. If you want to schedule ahead and safeguard your funds, talk to one of their foreign exchange experts today.

Buying property  in Greece after Covid-19 is on the rise as the Greek government is looking to make purchasing a home in the country easier and cheaper through a range of attractive measures.

If you are dreaming for a cheap retirement in warmer climates, then the new initiative by the Greek government might be just enough to persuade you to buy property in Greece.

Like many other countries struggling with the economic impact of the Covid-19 pandemic, Greece wants to revitalise the economy by incentivising foreign buyers to purchase their dream home in the land of the Myrmidons and other legends. One of the ways the government is trying to appeal to home buyers is by raising the tax-free ceiling on the supplementary tax included in the property tax surcharge known as ENFIA imposed during the bailout years. According to the Greek newspaper The National Herald, “the ceiling is 250,000 euros ($294,823.35) and may be increased to as much as 350,000 euros ($412,752.55) and the supplementary tax will be abolished once ENFIA comes under the jurisdiction of municipal authorities as of 2022. Earlier the government said it would offer European pensioners a flat tax of 7 percent no matter their income – it's 28 to 44 percent for Greeks – if the foreigners moved their tax base to Greece as a condition.” The condition for pensioners is that they “cannot have been a tax resident of Greece in the previous five years before the relocation and must be relocating from a country that has a dual taxation agreement with Greece.”

Greece’s Tax Incentives

Brits usually go to Spain, so why not Greece? Greece is making an attempt to attract British and other Europeans to relocate in the warm Mediterranean country and birthplace of Democracy. Known for the Parthenon at the Acropolis, its beautiful sun kissed islands and the romantic sunsets at Sounio, Greece is now appealing to pensioners through tax incentives. While many countries want to attract a younger generation, the Greek government is interested in luring Europe’s retirees. “The logic is very simple: we want pensioners to relocate here,” says Athina Kalyva, head of tax policy at the Greek finance ministry. “We have a beautiful country, a very good climate, so why not?” Kalyva said that the government initiative is centred on passing this new flat income tax rate of 7% for foreign retirees who will transfer their tax residence to Greece in the next 10 years. She explained: “We hope that pensioners benefiting from this attractive rate will spend most of their time in Greece. That would mean investing a bit – renting or buying a home.”

Greece wants to apply the flat rate not only to pensions but to other sources of revenue too. The chief economic adviser of the Greek PM Kyriakos Mitsotakis, Alex Patelis, said that “the 7% flat rate will apply to whatever income a person might have, be that rents or dividends as well as pensions. As a reformist government, we have to basically try to tick all the boxes in order to boost the economy and change growth models in Greece.”

After successfully dealing with the coronavirus pandemic, Greece wants to boost the brand name Greece, Patelis said. “Once the pandemic subsides, we believe capital and labour will move to places that did relatively better.”

As economics professor Platon Tinios noted, “it’s a good idea if pensioners have easy access to a decent health system and good links to airports, so they can go and see their grandchildren. And golf courses, too.”

If you are considering buying your dream home in Greece, you should contact a foreign exchange specialist to assist you with transferring your money abroad, explain currency exchange, and hedge your funds from unpredictable currency movements. Get in touch with Universal Partners FX so you can have peace of mind when sending a large amount of money overseas. If you want to schedule ahead and safeguard your funds, talk to one of their foreign exchange experts today.

 

Sustainability is a hot topic in the finance world, starting several years ago when many of the larger banks were pressured to move away from oil and gas and move towards the low-carbon economy. Having now seen the positive environmental impact that came from enforced COVID-19 lockdowns, there is now a call for sustainability to be a key component of the economic recovery. Transferring billions internationally on behalf of our clients, we have noticed a shift in where this money is going and what it is facilitating to suggest that a greener economy is achievable. As always, exchange rates can play a pivotal role in the growth of new industries that rely on international investment or global supply networks,

Solar Energy

Prior to 2008, solar cells and panels were mostly sourced from Europe, but since the market became more saturated the majority are now imported from China, Malaysia and Taiwan. These countries have notable world-leading solar farm projects, but a lot of the new projects are taking place in developing countries in Asia, South America and Africa.

As well as importing the technology and components, developing countries also rely on overseas investment from larger economies like the US to kick start projects. However, the risk associated to a certain currency may affect the confidence of the investor, therefore currency hedging becomes a crucial factor in the planning stage to ensure the investor is protected. In 2013, the sharp decline of the Indian Rupee meant that US investors lost significant profits on renewable energy projects.

Since 2016, we have seen a growing number of new clients being involved in renewable energy projects around the world, not to mention the emergence of flat-pack homes which are designed with solar panels. It was even suggested recently that flat-pack homes could be the answer to the affordable housing shortage in the UK. With developments like these we expect to see a continuation of the trend In the last 4 years, where the percentage of total FX volume attributed to renewable energy and sustainability projects has risen five fold, resulting in FX volume of over £137 million.

The Lithium Age

At the start of 2019 the growth of Electric Vehicles (EV) was highly anticipated. New climate agreements and legislation seemingly pointed towards the EV revolution. As the batteries in electric vehicles rely on lithium, this led to a surge in production ready for sales of EV to kick-off and even had some people asking 'Is lithium the new gold?' However, it didn't quite materialise as the slow-down of the EV market led to over-production and depreciation. Now, midway through 2020 it seems that lithium could be back in the spotlight.

Chile and Argentina - with their salt plane brine deposits - are two of the biggest Lithium producers in the world, alongside Australia and of course China, who rely heavily on Lithium for their vast electronics manufacturing operations. Since the start of the year we have taken on a number of clients who are directly or indirectly involved in importing lithium to the UK or producing the batteries for EV. We have seen over £20 million this year already, which is more than the whole of 2019.

UPFX and our pride in sustainability

With a passion for what we do, we not only want to help our clients but we also want to leave a positive impact on the world in general. With some of the largest banks starting to take a lead on sustainability, we also want to do our bit to ensure that the transition to a greener economy can continue apace. Along with thorough money laundering checks, our team also like to know that the transfer meets our sustainability requirements.

To get live exchange rates for your international transfer click here

 

 

We are delighted to announce our nomination for Best Money Transfer Service at the Money Age Awards 2020.

With it being such a challenging but fruitful year so far for the company, we are extra proud to gain more recognition for the services we are providing within foreign exchange. This comes after our 20th position ranking in the Start Ups 100 and also our listing by the Crown Commercial Service for our special efforts to help businesses and the community during the COVID-19 outbreak.

The winner of the award - from a three-name shortlist - will be announced on 8th October at the Waldorf Hotel in London.

The recognition we are receiving is testament to our staff and the hard work they put in to ensure our clients receive the very best foreign exchange solutions. At a time of global uncertainty, expert guidance has never been more important.

To get a quote for international money transfers click here, or you can register for free here.

 

Sterling has rallied after better than expected forecasts from the Bank of England. The Bank noted that the economic standstill in the period between April and June was “less severe” than anticipated. While the UK economy has considerably shrunk this year due to the Coronavirus, it is now on a path to recovery, slowly picking up again.

Bank of England Monetary Policy Meeting

In its Thursday morning meeting, the Bank decided to keep UK borrowing costs at record lows, interest rates at just 0.1%, and its quantitative easing programme at £745bn.

According to its forecasts, UK recovery will take longer but the slump will be less severe. The Bank said that “the fall in output in Q2 is expected to have been less severe than was assumed in the illustrative scenario in the May Report. In that scenario, it was assumed that restrictions would be gradually unwound between early June and late September, but they were lifted earlier.” In terms of recovery, this will take time:

“In the MPC’s central projection, GDP continues to recover beyond the near term, as social distancing eases and consumer spending picks up further. Business investment also recovers, but somewhat more slowly. Unemployment declines gradually from the beginning of 2021 onwards. Activity is supported by the substantial fiscal and monetary policy actions in place. Nonetheless, the recovery in demand takes time as health concerns drag on activity. GDP is not projected to exceed its level in 2019 Q4 until the end of 2021, in part reflecting persistently weaker supply capacity. Given the scale of the movements in output, as well as the inherent uncertainty over the factors determining the outlook, the evolution of the balance between demand and supply is hard to assess.”

Labour market and employment

The Bank also warned that unemployment will rise sharply by the end of the year. The Bank’s monetary policy committee said:

“Employment appears to have fallen since the Covid-19 outbreak, although this has been very significantly mitigated by the extensive take-up of support from temporary government schemes. Surveys indicate that many workers have already returned to work from furlough, but considerable uncertainty remains about the prospects for employment after those support schemes unwind. In the near term, the unemployment rate is projected to rise materially, to around 7½% by the end of the year, consistent with a material degree of spare capacity.”

The unemployment rate is currently 3.9%, and the government’s furlough scheme is helping employers to keep their staff.

The Monetary Policy Committee highlighted the threat of unemployment, which will remain high next year too. The Bank’s economists said that the “Labour market slack persists over the first half of the forecast period, as unemployment is judged likely to decline only gradually after peaking in Q4. The gradual decline in part reflects an expectation that hiring will pick up relatively slowly, consistent with uncertainty affecting companies’ demand for labour. In addition, the MPC judges that there is likely to be some reduction in the efficiency with which people can find jobs. That tends to happen as unemployment rises, as some people take time to find new jobs, and their skills erode. Moreover, in the present conjuncture, the dispersed effects of Covid-19 on economic activity across sectors are judged to be likely to result in a greater degree of mismatch than usual, given differences between the sectors from which workers have been made unemployed and the sectors in which firms are posting vacancies.”

Speaking at a press conference on Thursday to discuss the Bank’s Monetary Report, Bank of England governor Andrew Bailey said that the forecast that unemployment might almost double to 7.5% is a “very bad story.” But he also said that it will eventually fall back to 4.5% by the end of 2022.

Negative Interest Rates?

The Bank of England said that it is currently considering the possibility of imposing negative interest rates in the UK, as other banks including in Japan and the Eurozone, have done. This means that banks will be charged for leaving money with the central bank, so they are forced to lend them. The Bank is currently deciding whether this will impact on the financial system, economic confidence and bank profits, as well as savers. According to the Bank, “the effectiveness of a negative policy rate will depend, in part, on the structure of the financial system and how the policy transmits through banks to the interest rates facing households and companies. It will also depend on the financial and economic conditions at the time.”

 

Transferring funds abroad?

Bank of England governor Andrew Bailey said that “There are some very hard yards, to borrow a rugby phrase, to come. And frankly, we are ready to act, should that be needed.” If you feel the same and you are ready to act, then get in touch with Universal Partners FX. Whether you are transferring funds overseas to family or for a new property, then Universal Partners FX team can help you access the most competitive exchange rates and make your stress-free.

The pound has risen against the dollar, as July has been the best month for Sterling in more than a decade, partly due to the dollar’s weakness. On Friday, the pound was at its highest level in almost five months. Positive news on Monday, also offered support to the pound which was also the best performing major currency of the past week, a result of better than expected economic data, global stock market recovery and expectations for a Brexit trade deal being agreed by October.

On Monday, the release of manufacturing PMI for July showed that the UK’s manufacturing sector continued its rebound in the wake of the coronavirus pandemic, with new orders growing at the fastest pace since late 2018.

UK Factory Output

UK factories increased production at the fastest rate in nearly three years in July, as plants reopened after the Covid-19 lockdown. The headline manufacturing PMI from IHS Markit and CIPS rose to 53.3 in July in the final reading, the highest reading since March 2019. The flash estimate was 53.6 and June’s 50.1. The output component was up at 59.3, the highest since November 2017. PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.

Signs of an economic recovery improved manufacturers’ sentiment, with confidence rising to its highest since March 2018. 62% of companies are now expecting production to be higher in 2021 and only 12% of firms are predicting a contraction. Sentiment strengthened across the consumer, intermediate and investment goods industries.

In terms of manufacturing employment, job cuts were linked to redundancies, natural wastage and aligning capacity with current manufacturing needs. Purchasing activity was increased but supply-chain disruption continued.  

Will pound remain steady this week? Thursday’s BoE policy meeting

The main event for Sterling this week will be Thursday's Bank of England policy meeting. At the June meeting, the BOE’s monetary policy committee kept the Bank rate at 0.1% but added £100bn into the economy by increasing its quantitative easing (QE) programme to £745bn. At the meeting on Thursday, it is expected that interest rates will be kept unchanged and markets will be watching for any signals as to whether quantitative easing will be expanded.

If the Monetary Policy Committee is optimistic about the economic outlook, Sterling could be supported. Asmara Jamaleh, Economist at Intesa Sanpaolo said: "Expectations are for unchanged rates and QE, although a potential display of openness to further monetary stimulus soon should weaken the pound, especially if the negative rate option is mentioned. An expansion of QE would have a smaller impact.”

Philip Shaw, chief economist at Investec, says:

“Our expectation is that the votes on both the policy rate and QE will be unanimous in favour of ‘no change’. But we expect the speed of gilt buying to be reined back further. The Bank of England is due to announce the reverse gilt auction sizes beyond 6 August and has hinted that the programme will run more or less to the end of the year. This suggests a weekly gilt purchase rate somewhere close to £4bn per week in order to meet the total £745bn target at that point. In trying to gauge the policy stance further ahead, we expect the committee to note that the economy has enjoyed further recovery momentum recently ... Welcome though this is, it of course reflects the response to the gradual unwinding of the lockdown. What is more critical is how the economy looks towards the end of the year as, for example, the CJRS (furlough scheme) expires. Moreover members will also note the signs of higher coronavirus infection rates on Continental Europe, in the US and to an extent the UK. The MPC’s assessment of the current indicators will probably be one of guarded optimism, but tempered strongly by the risks facing the economy further ahead. We think there is a strong chance that the committee sanctions a further £75bn- £100bn of QE in November.”

Transferring funds abroad? With more positive news coming out of the UK, the pound is expected to perform well. If you want to transfer funds to family and friends living abroad, get in touch with our friendly  Universal Partners FX team. UPFX’s dedicated foreign exchange specialists can help you access the most competitive exchange rates and make your currency transfers stress-free.