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The beginning of April showed some really positive signs for the UK economy and therefore GBP/EUR rates, as Average Wage Growth and Unemployment figures impressed, highlighting the lowest unemployment levels seen in 43 years. However, Sterling came under increased pressure towards the end of April as the chances of an Interest Rate hike at the Bank of England’s next meeting in May rapidly diminished. A wave of poor economic data from the UK, including Inflation and Retail Sales figures disappointed during April, which was rounded off with the worst Gross Domestic Product (GDP) figure announced since 2012, falling to just 0.1%.
This shift in sentiment has meant that GBP/EUR Interbank levels have fallen by 2.3% over the last month, meaning that a £250,000 transfer in to Euros would now achieve €6,500 less than it would have at the middle of April.
As such, Economists are now predicting that the Bank of England will not make any changes to monetary policy at their next meeting on Thursday 10th May, and one of the UK’s largest Banks have predicted only a 20% chance of a rate hike at this meeting. This could mean that the Bank of England could either wait until August, or some economists are even predicting no change at all this year. It will be really interesting to see whether the Bank of England surprises the markets by raising rates in May, but if they do choose to hold off I would expect GBP/EUR to fall considerably. The minutes released shortly afterwards could provide clarity around their next moves, and will likely be a key mover for GBP/EUR exchange rates. Clients looking to buy Euros with Sterling in the short to medium term could be sensible to transfer ahead of this key announcement, as the current trend is that good news is usually creating small gains, however bad news is creating much larger losses.
Brexit negotiations are of course still ongoing and are also playing a big part in holding down the value of the Pound, in particular the subject of the UK’s relationship within the Customs Union. The divide within the Conservative Party appears to be widening, however hopes are that an agreement on whether the UK stays in the Customs Union is reached by the time of the EU Summit in June.
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…or an apartment, manoir, smallholding, chateau or gite…
Whichever category your French property falls into, or whether it is something else entirely, we want to help you make the most of marketing what can be your biggest asset. So, at the time of year which traditionally signals the start of the property hunting season here are some ideas to help you sell your French property:
Unless you are selling a renovation project it needs to look well maintained, straightforward and easy to run. A buyer must not be frightened off at the thought of costly maintenance, structural problems on the horizon or something that is going to be time consuming or expensive to live in. So:
· Attend to routine maintenance
· External woodwork should be recently painted
· A fresh coat of neutral colour paint inside if rooms look tired
· Outside cut the grass and prune trees and shrubs, and keep them that way
· A load of fresh gravel on the drive or parking area gives the area outside of your house a relatively inexpensive lift
A buyer must be able to imagine themselves living there surrounded by their own possessions, so you want your house to look as light, spacious and neutral as possible.
· Get rid of all of the junk you have been meaning to recycle for ages
· Clean out cupboards, tidy and streamline bookcases and shelves
· Pack away as many personal effects as you can bear to be without
· Neutralise colour schemes and minimise patterns wherever possible
So does the price
It is very hard to accurately gauge the true value of your own house, and well-meaning friends don’t always understand the true state of the property market, so
· get several valuations (you may be very surprised at the variations in valuation you are given). Places to go to for a valuation include local and national estate agencies, notaires (particularly if probate is involved), our own E-valuation service and independent web sites such as www.immoprix.com and www.meilleursagents.com/prix-immobilier/
· if you are dealing with an estate agent, make sure you understand the mandate. Mandates are binding contracts and they vary – has the agent included their commission in the selling price? Are they trying to penalise you if you sell privately? Are they asking for exclusivity? How long are you contractually obliged to use them for and how do you bring that obligation to a close?
· Make sure you are happy with the price you finally decide to put your house on the market at – don’t be browbeaten or flattered into making the wrong decision.
A picture speaks a thousand words
The importance of photographs cannot be overstated. You can get them taken professionally but as a homeowner with a smartphone you can usually do a perfectly good job yourself. Remember – you own the copyright of photographs you have taken or commissioned and can use them as you want. If an estate agent takes them they are theirs – and you need their permission to use them.
· The “hero” shot (or lead photo) is your most important marketing tool. It is the bait that first hooks the fish and so has got to be right for the job.
· Consider your property’s best angle. This need not be the facade…it could be an architectural feature or something which sums up the character and charm of your French home. This is one of our most successful “hero” shots at the moment. The house being sold is a town house in a wine producing region and this picture sums up why many people want to move there:
· The hero shot does, of course, need to be backed up by other photos which tell the wider story of your property but still leave something further to be discovered by an interested buyer.
You need to kiss a lot of frogs…
………before you find your prince.
As a rule, French property takes much longer to sell than British, for example. We do sell property in a month (or two) of taking it onto our books, but everyone knows of property which has been on the market for several years and one to two years is not an unreasonable time to allow for selling your house, even if you have the price, presentation and photographs absolutely right. The fact is that there is a lot of property around and the dynamics of the French housing market are different to elsewhere. To maximise your chances of a sale:
· Make sure you have the correct paperwork to hand and that it is up to date
· Deal with all enquiries about your house for sale promptly and honestly - and keep records of who has seen your house, a summary of their visit and how they found it in the first place.
· Be professional – showing people around your house is a skill and there are tips and techniques which can make a viewing much more likely to result in a sale.
…Be patient – Buyers can take a long time to materialise and then make up their minds. The legal process is slow and can be frustrating. Remember you bought your house didn’t you. And, sooner or later, so will someone else.
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November brought with it a number of key market moving events for Sterling exchange rates. Firstly, the Bank of England decided to raise interest rates to from 0.25% to 0.5%. Although this would usually be well received by the markets, the Pound actually weakened significantly following this announcement. The reason behind this was that the commentary from Governor Mark Carney painted a bleak outlook for the UK economy, and instead of suggesting that interest rates would steadily climb over the years ahead, which had been widely expected, he suggested there may only be two further hikes over the next 3 years.
Another key event followed towards the end of the month when Chancellor of the Exchequer Philip Hammond delivered the Budget.
This did little to lighten the mood for Sterling, with the main disappointment being caused by the downwards revisions of UK growth forecasts for the years ahead.
GBP/EUR exchange rates in November
GBP/EUR interbank exchange rates fluctuated by over 3% during the course of November. This equates to an additional €7,000 on a £200,000 transfer for those buying in France, or an additional £5,500 on a €200,000 transfer when selling to move back to the UK, if the transfer was timed at the peaks of the month. This just highlights the importance of being in touch with a currency broker to alert you as these spikes occur.
Although December may appear to be a quiet month with Christmas festivities being the focus for many, this is certainly not the case for the currency markets. The topic of Brexit is really heating up now, and in just over 2 weeks’ time on 14th-15th December, all 27 EU leaders will meet to discuss whether the UK can move on to the second stage of negotiations - trade talks. Many topics need to be addressed and decided before this can happen, including an agreement on the amount the UK will pay for the Brexit “divorce”, as well as coming to a decision on the Irish border dispute.
Also on 14th December, the Bank of England will meet to deliver their decision on any changes to the UK’s interest rate, and although no change is expected, the minutes following this usually creates volatility for GBP/EUR exchange rates.
Please note that exchange rates quoted within this report are interbank rates of exchange. These are used to give an accurate picture of the market but unfortunately these are not dealing levels.
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Theresa May made a speech at the beginning of March as part of the ‘Road to Brexit’ series of talks, where she confirmed that she will continue to demand a bespoke Brexit deal for the UK. Her speech was relatively well received, however didn’t have as much of an impact on GBP/EUR rates as had been hoped, partly due to the speech being leaked to the press in the morning before. Trade discussions are expected to begin at the end of March, however the UK and EU continue to clash over the UK receiving a bespoke deal, while the EU refuse to let the UK cherry pick which benefits they want to keep. The main question now is, will the discussions move forward to trade talks at the end of March as expected? And what would the consequences be for the Pound if no deal is agreed?
There have been some excellent reports on the UK economy from the last month, with UK productivity growing at the fastest pace in the second half of 2017, and UK government borrowing recorded at the lowest levels for the financial year to date, both since the financial crisis. However one topic to keep a close eye on which I expect to be a key mover for GBP/EUR exchange rates is the matter of UK unemployment. This unexpectedly rose in the last quarter of 2017, and with retail sales also being hit with the likes of Toys R Us, Prezzo, and Maplin all making closures across the UK, unemployment rates could be at risk of rising rapidly. The next Unemployment figures are due on 21st March and Retail Sales expected on 22nd March, therefore it may be worth making plans ahead of these releases. Both of these data sets are key to deciding on Monetary Policy for the months ahead, so if these releases are worse than expected, this could be a sign that the Bank of England will not be raising Interest Rates in the near future, which would almost certainly result in Sterling weakness.
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The Pound has made considerable gains over the course of October, and Interbank levels are currently sitting at the highest levels seen since the end of September. This has meant an additional €7,500 on a £250,000 transfer when trading now compared to the lows of the month.
There are three main factors behind this excellent run for the Pound:
Firstly, since Bank of England Governor Mark Carney hinted towards the possibility of an Interest Rate hike at their next decision meeting in November, investors have reacted exceptionally well to this positivity.
Secondly, although at their latest meeting at the end of October the European Central Bank decided to decrease its monetary stimulus, seen as a positive sign for the European economy, it was the comments which followed by ECB President Mario Draghi that knocked investor confidence in the Euro. He said that Interest Rates would be kept on hold until far beyond the end of their stimulus programme, which is now set to run until at least September 2018, and they will be quick to increase stimulus once again if the economy shows any signs of weakening. All in all, this spooked investors who moved their funds out of the Euro, and into the Pound and US Dollar – therefore weakening the Euro.
Lastly, the ongoing situation regarding Catalonia has heaped further pressure on the Euro. Spain are struggling to contain Catalonia’s push for independence, and although this isn’t something which is likely to be granted, uncertainty of any kind can usually be detrimental to the currency in question.
The main event to watch out for now is this Thursday 2/11 where members of the Monetary Policy Committee will decide on whether to raise UK Interest Rates. One of the latest polls showed that there is an 84% chance that the bank will raise rates by 0.25%, bringing UK Interest Rates to 0.5%. However, as this is widely expected and therefore likely to already be priced to current exchange rates, if the bank either decide to keep rates on hold, or don’t raise by the expected 0.25%, we could see substantial losses for the Pound.
I would recommend any clients looking to buy or sell in France in the near future to get in touch, so that we can help you to put a plan in place for your future currency transfer. We can be your eyes and ears on the market during volatile periods such as these, and could save you thousands on your currency transfers by helping you to trade as any spikes occur.
Written by Amelia Spencer, Affiliate Relationship Manager at Foreign Currency Direct