paulry

Yes it certainly was one of those "meant to be" moments. I wonder where the next stop on this magical mystery tour will take us

swigski

The alternative is to go ahead with the move, rent a house, put the money in a bank account and earn a nice $2300 a month interest at todays int rates. With the int rates set to go up that will increase. That would pay for a very nice rental and some change to play with.
Alternatively, leave the money in the UK , move over and rent. I think you would be silly to buy in Aus for the next couple of years anyway. The housing bubble is almost ready to burst!

Damson

OH FRIG!!!!! Read it and weep.

11 November 2009

FX065 The Pound declines amid speculation of a downgrade in UK credit rating

GBPEUR/GBPUSD

The Pound declined from the highest level in three months against the U.S Dollar yesterday, while the UK currency also lost ground against 15 out of the 16 most actively traded currencies, after Fitch Ratings said that the UK's sovereign credit rating is the most susceptible among the top rated countries. The UK currency has suffered another rejection of the 1.12 level against the Euro and fallen almost 1% since the close of trading last night to a low of 1.1093.

Sterling dropped back towards $1.66 against the U.S Dollar, from a three month high of $1.6840 yesterday, after David Riley, Fitch's head of global sovereign ratings, said that the UK's rating faces risks because the economy has the "largest budget adjustment." Standard & Poor's has a 'negative' outlook on the UK's top level rating, after lowering it from 'stable' in May.

Britain last month reported the largest budget deficit for any month in September, since records began in 1993, as the recession curtailed tax revenue and drove up welfare costs. The £14.8 billion shortfall compared with a deficit of just £8.7 billion a year earlier and the Pound dropped as much as 0.9% in the minutes that followed the report.

Riley was also quoted by Reuters as saying that the U.S's rating might also be at risk of a review if its fiscal position does not stabilise in the next couple of years. The Prime Minister Gordon Brown told a press conference in London and he said that "we have assured people that we're taking the necessary action to cut the deficit in half. Our debt levels are roughly the same when this crisis ends as America, as France, as Germany."

Sue Trinh, a senior currency strategist at RBC Capital Markets, said that "the Pound fared the worst, with Fitch noting that the UK was most at risk of losing its AAA status among the major economies. Their comments injected a small dose of risk aversion into the market, lifting the Dollar and the Yen."

The Pound pared its decline against the majors, after a gauge of UK house prices rose to the highest level in almost three years in October, as a shortage of homes for sale intensified. The number of real estate agents saying that prices exceeded those reporting declines by 35 percentage points, the most since December 2006.

Buyers are returning to the housing market after home values fell as much as a fifth from their peak in 2007. Bank of England policy makers last week slowed the pace of bond purchases, amid signs that rising property and stock markets are helping the economy shake off its worst recession in at least three decades.

Services, manufacturing and house prices are showing signs of recovery, as consumer confidence grows. Mortgage approvals climbed to their highest level for 18 months in September, and the Department for Communities and Local Government said yesterday that house prices rose 1.2% in the same month compared with August.

A separate report from the British Retail Consortium survey released yesterday showed that stores posted their best October sales growth since 2002. Sales at UK stores rose 3.8% last month from a year earlier. Sales dropped 2.2% in October 2008, after the collapse of Lehman Brothers Holdings Inc sent consumer confidence tumbling.

The latest trade data was, however, weaker than expected yesterday, with a £7.2 billion deficit for November, as there was a rise in import demand. The Bank of England's quarterly inflation report will be significant this morning, especially as this report has triggered a very high degree of Sterling volatility over the past few releases.

There is also likely to be a mixed report for this quarter and the BoE will be concerned over the risk of a significant inflation rise over the coming months, especially with energy prices trending higher. In contrast, there is liable to medium-term expectations of low inflation and a large output gap. Sterling would tend to gain initial support on any forecast of higher inflation, although any upside momentum may prove unsustainable.

Euro and Dollar buyers may wish to consider taking advantage of the recent upside momentum, ahead of the Bank of England's quarterly inflation report tomorrow. The UK debt position continues to have a significant impact on the market and for all the positive sentiment towards an economic recovery, there is a lingering thought that the next bit of bad news is always just around the corner.


EUR/USD

The Dollar rallied from a near 15-month low against the currencies of major U.S trading partners, amid speculation that demand for riskier assets will drop and investors will flock to the security of Dollar denominated assets. The U.S currency gained 0.2% against the Euro to $1.4977, from $1.50 on Monday, the strongest level in almost a month.

The Dollar will probably end the year around $1.50 against the Euro and may decline to $1.60 by the end of 2010, as the Federal Reserve trails other central banks in raising borrowing costs. Tom Fitzpatrick, chief technical analyst at Citigroup Inc, said "we believe the market is ready to trend higher again, a rally though $1.5064 would "open the way" for $1.5285"

European central bank member Yves Mersch said that policy makers may raise their economic growth forecast in December. The Euro struggled to consolidate on recent gains, after German investor confidence declined more than economists' forecasts in November, as the prospect of expiring government stimulus program and rising unemployment tempered expectations for the economy.


Data Released 11th November

paulry

Is this the general consensus?

paulry

The case looks more and more compelling to keep your property in the UK until things sort themselves out. But it might take years.

koalakim

Yes, but then the pound bounced back again against the US$ after Fitch then said but they wouldn't really take away it's credit rating!

Shows you how volatile the markets are at the moment. Certainly for the pound this week against a whole bunch of data coming out.

Some of it so far if you read it positively is that things are bad but not as bad as there were - the badness is getting less dramatic or even an underlying positivity! Having said that just looked at the GBP/A$ and it's gone down a cent. Need to change some more by mid-Dec so hoping it will have calmed down a bit by then and gone up a tad....oh I dream of $1.85 these days!

Re: housing bubble......there was a flash bang wallop headline in The Age online today about a bubble burst. Who knows - plus it depends on your area, supply etc. Houses have gone up where we are but sometimes there seems no rhyme or reason when you have two similar properties why one sells instantly and the other hangs around for months. What I would say is that those that need gutting seem to be going on for full price - it's seems that the value then is in the land and not the house - or they are just trying it on

paulry

There was a UK TV news report (not sure which channel) a day or two ago which hinted that consumer confidence is returning. But it's all very much like the speculation of any housing bubble going pop. The more people that talk about it the more likely it is to happen .

MartinLuther

I keep hearing about the Aus housing bubble bursting but I do wonder; is there an Aus housing bubble? I can see that there is a WA housing bubble and there may be housing bubbles in other states but in Vic I reckon house price rises have been quite muted. 3 years ago growth was zero or negative. This was before the GFC. Looking at prices around the area now I would say that they are 15-20% higher than they were 5 years ago. That's 4-5% a year (simple growth). That's not a bubble. The economies and the housing situations of the Australian states are not as tightly bound as some seem to suggest. It is quite common for some states to be doing well whilst others have been less fortunate.

So are we really talking about the Aus housing bubble bursting or just some of the states?

swigski

Good well balanced article on the ??Housing bubble in Australia

http://www.takeonit.com/question/203.aspx

ABCDiamond

I wonder if any of those experts have different views now, almost a year and a half later...

isgraham

If it's not a bubble then people here are far more willing to carry debt than just about anyone else in the world.

MartinLuther

Is the debt being carried higher than everywhere else in the world?

WillBlack

There's Gooood Debt. That's debt that doesn't cost so much after it comes off your taxable income. Then there's Baaaad Debt. That's debt that all the stupid people have.

king kong

your right on the money with each state being differnt ,almost like small individual countries .
Here in the west the differnce can be as small as 600 km ,with the perth market in a huge slump and the kalgoorlie market booming because of gold .
perth is overvalued in my opinion , who bloody knows .Infact i reckon the whole western worlds property is overvalued compared to joe blows income on the street .To contradict what i have said though ,here and the uk people seem to be keeping hold of their homes ,so must be able to handle their current debt state , where the whole lot will crack on interest rate rises who knows , i know i wouldnt want a 350000 mortgage on 8-9-10% and rising unemployment .what a nighmare .

swigski

Some more recent data which shows the same

http://www.debtdeflation.com/blogs/

Some snippets from:

The Australian result of only one negative quarter of growth, followed by a return to positive growth is the best in the OECD. This was driven by:

The dramatic positive impact on household budgets from the cut in interest rates by 4%, which reduced debt service from 15.4% to 10.3% of disposable income;
A stimulus package that was equivalent to 2.5% of GDP, the largest such package in the OECD;
The enticement to households to take on additional mortgage debt that goes by the name of the First Home Buyers Boost.
The first two factors alone resulted in a 9% increase in houshold disposable income over the year from June 2008 to 2009—an unheard of development in boom times, let alone during an economic crisis.

The combination of the RBA’s rate rises and the ending of the First Home Buyers Boost will in all likelihood prick the house price bubble inspired by the Boost in the first place—and lead as many as 175,000 households to be very angry that they were enticed into this speculative bubble in the first place. If this happens, there is little prospect of making the House Price Souffle rise twice by yet another foolish enticement into debt.
The political pressure on the government may lead it to unwind its stimulus, which will remove a key prop from the economy; and
Deleveraging, which has been the looming problem that government policy (especially the First Home Vendors Grant) has simply delayed, will kick in as it has in the USA.