Currency Improvement for Sterling

Sterling climbs vs broadly weak dollar

* Sterling climbs vs dollar, dollar struggles after payrolls * Pound unchanged vs euro, sterling seen staying weak * Markets await UK retail sales, output data due this week

LONDON, Jan 11 (Reuters) - Sterling rose on Monday, boosted against the dollar after a weak reading of U.S. employment kept the U.S. currency under broad selling pressure.

The pound was supported versus the dollar, but gains were capped and sterling was unable to push higher against the euro as investors remain wary of the UK's mounting debt burden and weak economy, along with concerns about political uncertainty.

"Sterling is unlikely to outperform. If we get any bad news, euro/sterling will weaken," said Paul Robson, currency strategist at RBS in London.

By 1440 GMT, sterling GBP=D4 had climbed 0.6 percent to $1.6130, near the day's high of $1.6194.

The dollar remained under selling pressure in the wake of weak U.S. payrolls figures released last week and after a Federal Reserve official on Monday said U.S. interest rates may remain low for some time.

Still, sterling's gains were capped, with traders citing sell orders from Middle Eastern names as the pair approached the $1.62 level.

The pound poked above its 200-day moving average against the dollar around $1.6117 on Monday. Some in the market said that level would likely keep a ceiling on near-term gains.

Others said they expected sterling in the near term to push above the mid-$1.6250 level, which would be its strongest in roughly a month, but in the absence of any big driver, significant gains beyond that would likely be limited.

"Early this week we suspect cable will trigger stops above $1.6250 and revisit the $1.63/1.64 area," technical analysts at Barclays said in a note.

"Beyond that more sideways chop is the likely theme."

The euro EURGBP=D4 was flat on the day at 89.92 pence.

Analysts said UK economic and political issues would keep sterling under selling pressure against the euro, while any pound gains would be limited by the pair's 200-day moving average around 88.50 pence.

Sterling in past months has been dogged by the view the UK economy will remain weak for much of 2010, and that the Bank of England may be among the last of the major central banks to raise interest rates.

This is seen dampening the pound's appeal from a yield perspective. In addition, concerns about the UK political situation are seen keeping sterling weak as the nation prepares for a general election to be held by mid-year.

The possibility that no party may win an overall majority would leave the government struggling to pass measures needed to reduce the nation's ballooning budget deficit.

Underlining ongoing weakness in sterling, data from the Commodity Futures Trading Commission last week showed an increase in short sterling positions, indicating that speculators are continuing to bet that the pound will fall.

With few economic data or news driving sterling on Monday, markets awaited a reading of UK retail sales on Tuesday and industrial output figures later in the week for more clues of whether the economy is making a sustained recovery. (Editing by Andy Bruce)
 

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How to Buy Currency

How to buy currency
The flexible way to buy foreign currency

When buying foreign currency there are a number of factors you need to consider.

* When do I need the foreign currency? - Straightaway, on a specific date, or over a period of time?
* How many payments do I need to make? - A one-off payment or a number of smaller payments?
* How do I protect myself against adverse currency movements? - We can offer you a range of contract types to help you protect yourself against increased costs caused by foreign exchange movements.

Immediate transfers - a quick and easy way to buy foreign currency

Occasions may arise where you need your currency straightaway. This could be because you are about to complete on a property or because you want to take advantage of a favourable exchange rate. In most cases we can convert your money immediately and arrange the onward transfer of your chosen currency on the settlement date - normally just two business days after you place your order. The technical name for this type of instruction is Spot and is simply the quickest way of exchanging one currency for another. A one per cent deposit will be required when you place your order.
Fix the exchange rate

When buying a property abroad, or indeed for any large currency transaction where the payment date is some way off, you need to consider the impact that an adverse exchange rate movement could have on your costs. For example, a property costing £200,000 would have cost £132,722.80 on 23rd June 2005. Just one month later on the 22nd July 2005, the euro had risen in value against the pound and the same property would cost £138,773.24 - over £6,000 more, or 4.56%. Of course, the exchange rate could move in your favour but it is a risk you may not want to take. The Hargreaves Lansdown Currency Service offers you a variety of options giving both the certainty of knowing exactly how much it is going to cost you by fixing the exchange rate from the outset and also the flexibility of a timeframe to suit your needs.

Straight Forward - a simple way to fix the exchange rate

The technical term for fixing the exchange rate for a date in the future is a Forward. It means you can fix the exchange rate today on a transfer you intend to make at a later date. This type of transaction can be particularly important for buying an overseas property when the final payment is not due for several months but you need the certainty of how much the foreign currency is going to cost you in sterling. Forward contracts can be anywhere between three working days and two years ahead. You will be required to make a deposit of typically 10% of the value of your transaction when you place your order. The balance is then payable a few days before the settlement date.

Choosing a timeframe - keeping your options open

When buying a property in either the UK or overseas you are often faced with the problem of the timing of your final payment. It could be the case that you are waiting for a property to be built and you have only been given an approximate date of when it will be completed.

We realise that this can be an inconvenience as you will not always know the exact date on which you will need your foreign currency. This is why we have adapted our standard Forward contract to give the extra flexibility you need. You still have the advantage of fixing the exchange rate but also the added advantage of choosing a time during which your currency can be converted at the fixed rate - for example a three month period. The technical name for this is a Time Option, which simply means you have an option to have your currency paid to you over a set time instead of one final date. You will be required to make a deposit of typically 10% of the value of your transaction when placing your order.
 

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Online Currency Facts

The Euro: the facts, the UK referendum, the arguments
 

Linda McAvan MEP

The Facts

• The Eurozone: Twelve EU countries adopted the Euro as their currency on January 1st 2002. Only three EU countries remain outside: Denmark, Sweden and the UK. Countries joining the EU after 2004 will also adopt the Euro.
• Euro coins and notes: There are seven banknotes: 5,10,20,50, 100, 200 and 500. Notes are the same across the Eurozone to prevent fraud. However, Euro coins have one side with a common design, and one with a national design for example the Belgian King is on the Belgian coins. If Britain joined, we would be able to have the Queen's head on our coins. Each Euro is made up of 100 cents and there are eight coins worth 1 and 2 Euros, and 1, 2, 5, 10, 20 and 50 cents.
• Who decided to have the Euro? The member governments of the Eurozone decided to create a single currency because it would improve their economic performance. No-one can impose membership, each country has taken its own decision.
Why hasn't the UK joined the Euro yet?

• It's our decision: The government is in favour in principle of joining the Euro, but it has promised a referendum so that British people can take the final decision.
• Joining must be in the National interest: We will only join the Euro if it is in Britain's national interest. This is why 5 economic tests must be met before a referendum is called: whether Britain's economy has converged with the Eurozone; whether there is enough flexibility to cope with membership; the effect on investment; the effect on the City of London; the effect on growth and jobs.
• During previous assessment, the government determined that the 5 economic tests have not been met, and the referendum will not be held until they have.
Will the Euro be good for Britain?

• Jobs: 3.5m UK jobs depend on our trade with EU countries – and 60% of our exports. We export more to Belgium than Japan and only 16% of our goods go to the USA. Fluctuating exchange rates mean risk for businesses which export their goods. The Euro takes away that risk – and the cost of insuring against it. When people talk about saving the pound, they should make sure it's not at the expense of their job!
• Prices: Many people fear that prices will rise if we switch to the Euro. Evidence from the Eurozone, shows that though some prices were rounded up, others were rounded down, the overall effect on inflation being minimal. In the long term, the Euro will create competitive pressure, as it will be easier to compare prices across borders and shop around for cheaper suppliers. Prices should fall as a result.
• Investment in the UK: Many foreign companies invested in the UK to have access to the EU's common market. But research shows that some foreign manufacturers, hardest hit by the strength of the pound, are switching new investments to other countries. Investment in the UK fell by 15% in 2000, while it increased by 38% in the Eurozone, France being the most popular destination.
Arguments against the Euro

• An independent currency? Many people argue that if we switch to the Euro, we will lose our economic independence. But in the modern world, our economic prosperity is closely tied in with that of our main trading partners. Whatever affects France and Germany, will affect us. We can retain the pound as a separate currency, but that does not make it independent.
• What about our national identity? Our sense of who we are and our traditions do not depend on what currency we carry in our pocket. When we travel abroad this year, we will see that the French are still French, the Spanish still Spanish… .despite the Euro!
• More power for Brussels: there is a common misunderstanding that "Brussels" can impose laws on Britain. But the reality is that the European Union only has the powers which governments have given to it. It cannot take powers on its own. Most policy areas – in health, education, housing, pensions – are entirely in the hands of national governments.

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UK Currency Guidelines

Declaring cash when entering or leaving the UK - Government Guidelines
 

From 15 June 2007, if you are travelling to or from a country outside the European Union (EU), you will need to declare any sums of cash of 10,000 Euro or more (or the equivalent in another currency) to HM Revenue & Customs (HMRC).

You do not need to declare cash if you are travelling to or from another EU country.

For the purposes of this requirement, the countries of the EU are:

Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain (including the Canary Islands), Sweden, and the United Kingdom (not including the Isle of Man and the Channel Islands).
Declaring cash to HMRC

You must declare cash on duplicate Form C9011, and post the completed top copy 1 in the drop box provided at the port or airport.

You can either pick up the form when you get to the port or airport and complete it there, or you can print it down from this website, which gives you the opportunity to complete it before you start your journey.

HMRC officers may ask to see evidence of your having made a declaration. Therefore it is important to keep a copy of the completed form. This is automatically generated on carbon copy 2 if you make your declaration on a form provided at the port or airport.

Definition of the term 'cash'

The term 'cash' covers:

* currency notes and coins
* bankers' drafts
* cheques of any kind, including travellers' cheques.

Your rights if your cash is seized

HMRC officers will only seize cash if they have reasonable grounds to suspect it is the proceeds of, or is intended for use in, unlawful conduct.

Seized cash cannot be kept for more than 48 hours without a court order (not including public holidays and weekends).

A court may order seized cash to be:

* detained while investigations are carried out
* forfeited permanently if the investigation shows it is associated with criminal activity.

If your cash is seized, you will be given information on how to appeal against the decision.

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Pounds - Euros See Richard Branson Join the Banking World

Virgin Money buys into retail banking
 

By Paul Hoskins

LONDON (Reuters) - Richard Branson's Virgin Money is set to enter Britain's retail banking market, spending 50 million pounds on a tiny provincial bank with the licence needed to sell savings and mortgage products.

The consumer credit arm of Branson's Virgin Group said on Friday it had agreed to buy Church House Trust in a deal that values the bank, based in the west of England, at about 12.28 million pounds ($19.6 million).

Virgin will inject an additional 37.3 million pounds of new capital into Church House, a private bank founded in 1978 by a West Country family of solicitors with ties to the banking industry that go back to 1792.

Britain's Financial Services Authority (FSA), which assesses the fitness of anybody buying a bank and can block such deals, has approved Virgin's application to become the controlling shareholder Church House, Virgin Money said.

Branson, who is the country's 32nd richest person with an estimated fortune of 1.2 billion pounds according to the Sunday Times 2009 Rich List, has made no secret of his wish to find a springboard to launch him into Britain's banking sector and capitalise on the woes of a badly shaken industry.

"The Church House Trust business offers us a strong platform for growth," Branson said in a statement. "Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector."

Sources told Reuters earlier this week that Virgin Money was close to announcing an acquisition that could make it the first high-profile arrival in the sector since the onset of the financial crisis.

Virgin, which simply lends its brand to financial services products that are actually provided by the likes of Royal Bank of Scotland (RBS.L) and The Co-operative Bank, wants a banking licence so that it can become a fully fledged player.

It has been pursuing a number of avenues, including applying to the FSA in October for its own banking licence and a failed approach for Northern Rock, Britain's first victim of the global banking crisis.

Virgin is frequently named as a potential suitor for a slice of the billions of pounds in UK banking assets set to be put on the block over the coming months and years, including making another approach for failed mortgage lender Northern Rock.

Other possible acquirers of UK banking assets include National Australia Bank (NAB.AX), which says it is actively considering UK opportunities, retailer Tesco (TSCO.L) and Spain's Santander (SAN.MC), owner of Abbey.

Brazil's Itau Unibanco (ITUB4.SA) (ITUB.N) has also been named as a potential new entrant, and is reported to be interested in stakes in Royal Bank of Scotland and Lloyds (LLOY.L) held by the government.

Other new arrivals expected this year include Metro Bank, a start-up from U.S. entrepreneur Vernon Hill, and a bank backed by UK stockbroker Panmure Gordon (PMR.L). Both are awaiting FSA approval.

Virgin Money said it had already received acceptances in respect of 65.8 percent of Church House shares.

Quayle Munro Limited is acting as financial adviser to Virgin Money while Europa Partners Limited is acting as financial adviser to Church House Trust. (Additional reporting by Myles Neligan and Simon Jessop; Editing by Sharon Lindores)

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Article Reference: uk.reuters .com/article/idUKTRE60714020100108?pageNumber=2&virtualBrandChannel=0

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Currency Falls - Currency Conversions

Sterling falls on weak data, election jitters
 

* Sterling falls below $1.60 vs dollar; euro above 90 pence

* Jitters as UK election campaign gets under way

* Weak UK data, Cadbury rejection of new Kraft bid weigh

LONDON, Jan 5 (Reuters) - Sterling fell sharply across the board on Tuesday on worries about a flagging UK economy and high debt levels, coupled with jitters as an election campaign got under way.

Data showing British construction activity contracted for a 22nd consecutive month helped push sterling below $1.60 against the dollar and the euro above 90 pence, as it added to the view the UK recovery is lagging that of other major economies. [ID:nLDE6040N5]

Meanwhile, investors already fretting about how the UK will tackle its ballooning fiscal deficit became increasingly nervous about an upcoming general election, which has to be held before June, as campaigning began.

They are particularly mindful of the risks of a hung parliament, where no one party commands an overall majority. Analysts say such an outcome could mean any government would struggle to enact the fiscal measures necessary to cut UK debt.

"Sterling did sell off after the construction data, but it's largely the political backdrop that is the focus at the moment," said Christian Lawrence, FX strategist at RBC Capital Markets.

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GBP - Sterling | Pound faces Big Test in 2010

Sterling faces stern test in 2010

By Peter Garnham
 

Sterling
All change: Sterling is off 29 per cent against the euro since the onset of the financial crisis in September 2007

Sterling could be in for a testing 2010, with some analysts predicting it could finally hit parity against the euro.

The UK currency is expected to continue to feel the impact of the financial crisis - but it also has to negotiate a general election which could lead to a hung parliament and a big rise in political uncertainty.

Sterling has fallen 23 per cent in trade-weighted terms and over 29 per cent against the euro since the onset of the financial crisis in September 2007.

Michael Hart at Citibank says the UK economy shares many of the unwelcome characteristics of the US economy, which was at the epicentre of the crisis.

Like the US, the UK has a prominent and over-extended housing sector, a debt-financed, consumption-driven economy and a widening external deficit financed with income from foreign investment.

Analysts warn that the pound is set to lurch lower as the emergency measures put in place to fight the financial crisis are withdrawn, the cost of those measures begins to become apparent and political uncertainty in the UK heightens.

Ashraf Laidi at CMC Markets says "liquidity withdrawal" may become the buzz phrase of 2010 and the UK economy and its currency could fall victim to an excessive reduction in stimulus.

He says the Bank of England has already signalled that it does not intend to increase its quantitative easing measures any further while the UK Treasury is planning spending cuts and the general election promises to be a close race.

"None of these developments are set to favour the pound or the UK economy which has yet to recover from recession," says Mr Laidi.

"Sterling risks regaining its status as the whipping boy of FX in 2010 as these vital dosages of oxygen are removed from a still tepid economy."

The biggest challenge facing the pound, however, is the UK's fiscal position, including a large budget deficit and rising national debt.

The UK government expects to borrow an additional £707bn over the next five years. As a result forecasts suggest that by 2013-14 the national debt will reach around £1,500bn – or just over 90 per cent of GDP.

"Our reasons for disliking the pound are simple enough," says Simon Derrick at Bank of New York Mellon.

"At the heart of our argument remains the simple question of where the money will come from to fund the nation's projected fiscal deficit in the years ahead."

Mr Hart says once the UK's triple-A sovereign debt rating comes under threat, gilt yields are set to rise sharply and take fiscal policy out of the UK government's control.

He says unless the UK general election heralds a political sea-change, the UK's fiscal situation is likely to continue to deteriorate, resulting ultimately in a credit rating downgrade.

Mr Hart says the UK current account is also a weak point.

This partly reflects the diminished net income the UK earns from its overseas investments, suggesting a structural transformation of the economy that requires a permanently lower exchange rate.

"We expect the pound to drift towards parity against the euro in the next six months," he says. The pound almost reached parity with the euro at the end of 2008 when the euro was worth £0.9803. Sterling recovered in 1999, leaving the euro at £0.8878 at the year end.

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Currency Review

Quarterly Currency Review

Sterling suffered badly against the Euro in the third quarter, moving almost ten cents from the heady €1.17 levels to around €1.08, writes Nicholas Fullerton.

Sterling lost ground at the beginning of July due to poor Gross Domestic Product (GDP) figures, and for the remainder of the month trading was fairly 'range bound', i.e. no massive rate fluctuations.

However, at the beginning of August the Bank of England increased their Quantitative Easing (QE) program by £50bn. The program was designed to stimulate growth in the UK economy, and such a big increase worried the currency markets. This had a negative effect on Sterling as can be seen by the drop on the graph at the start of August.

There is a second sharp drop mid way through August when the minutes from the Bank of England's August meeting were released. These showed that some members (including Mervyn King – Governor of The Bank of England) actually voted for the £50bn stimulus figure to be even higher, at £75bn. This rocked the market and Sterling traded lower on the back of negative sentiment.
 

GBP recovered slightly towards the end of August as better than anticipated growth figures were reported.

However on the 15th September the sharpest fall on the graph occurs when Mervyn King indicated that he may reduce the interest rate on bank reserves and warned of a long slow road of economic recovery ahead. His comments weighed heavily on the British Pound and the Euro posted gains (going from €1.14 to around €1.050) over the course of the following few days.

If you are a Brit looking to buy a French property the Euro exchange rate falls in the quarter have severely decreased your purchasing power. At GBP/EUR €1.17, a €350,000 house is just over £299,000, but at a rate of GBP/EUR 1.08 the same property costs and extra £25,000, a difference that really brings into focus the impact an exchange rate can have on a budget.

Some comfort can be taken from the fact French property prices have also dipped by 10% to 20% over the past two years. If you are selling a French property now would seem an ideal time to repatriate funds.

Nobody knows what the future holds for Sterling. However, the UK was officially in recession through the third quarter of this year, as figures showed the economy shrank between June and September. It is the sixth successive quarter of contraction and leaves the UK in the grip of the longest period of continuous decline since 1955.

Many predict the UK will emerge from recession during the next quarter. If that happens it will almost definitely help Sterling claw back some lost ground.

Nicholas Fullerton,

Foreign Exchange Ltd

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