Wherei is the £ heading now.

[EMM]

Unfortunately Bri Si your grasp of basic economics leads a lot to be desired, The UK is a nett importer of all basic foodstuffs , commmodities and manufactured items. Weak sterling leads to rising prices and inflation. That puts demand on peoples spending power which in turn affects all major markets such as UK construction. ( Ie house building ).
Any one who thinks that house prices will fall to a level where true affordability and available credit returns during a period of declining spending power and limited finance is living in La La Land.
UK property ownership grows during periods of economic growth NOT decline.
As you say the second home market is to a degree irrelevant to the UK but to the Portuguese construction worker it is bread on his table.

Bri Si you were you not one of thos eforcasting the end of the Euro earlier this year.

[Bristle Si]

Unfortunately Bri Si your grasp of basic economics leads a lot to be desired, The UK is a nett importer of all basic foodstuffs , commmodities and manufactured items. Weak sterling leads to rising prices and inflation. That puts demand on peoples spending power which in turn affects all major markets such as UK construction. ( Ie house building ).
Any one who thinks that house prices will fall to a level where true affordability and available credit returns during a period of declining spending power and limited finance is living in La La Land.
UK property ownership grows during periods of economic growth NOT decline.
As you say the second home market is to a degree irrelevant to the UK but to the Portuguese construction worker it is bread on his table.

Bri Si you were you not one of thos eforcasting the end of the Euro earlier this year.

I think i forecast that the euro/£ exchange rate would reach 1.25 by the Summer - it wasn't far off that a couple of months ago. I did forecast that the Euro would come under severe pressure as well, generally, - i concede that seems to have abated.....for now.

As for your comments about a weak sterling - yes, inflation is remaing stubbornly above 3% but continued low interest rates, higher taxes and concerns over jobs, with little sign of inflationary pay rises in the UK in the foreseeable, will see consumer spending continue to come under pressure - this will put pressure on retailers to curb price rises or force them into the regular round of sales (as seen in retail land for years now). Inflation will fall to around 2% by early Spring 2011. UK Bank Base rate will not rise above 1.5% until well into 2012 IMO. I would see the £/euro exchange rate remaining around the 1.15/1.20 mark for a couple of years yet.

House prices will fall - they have to - to redress an economic imbalance. If you look thru' the last few months house price indices you'll see that the headline national price 'rises' quoted are in fact heavily skewed by a couple of regions. The cash rich (mainly active in London - surprise, surprise) is effectively propping up the housing market. And lately even the overall UK house price indices are showing slight falls or flat prices. This to me is an indication of another downward adjustment - it's all about trends. As for The Algarve, as i posted last week, after our return from our 11-day vacation in CVO - the housing market is under pressure - the local estate agents are showing 'false' prices - one expat told me that any potential buyers should have a starting offer of at least 40% below any asking price - a sure sign indeed that the CVO house price bubble is bursting. Take care.

[Matryx]

This is not speculation but the markets view of the UK,s finances.
Sterlings movements in recent years have had a dramatic negative effect on the tourist income of countries like Portugal, The incomes of expats and the construction and property markets in Portugal.

The rise in sterlings overall value in the summer was seen as a return of confidence, its current value is a reflection of a decline in confidence.

Its current state is contrary to many of the views of economists and of those who thought that it was the Euro that had problems.

The Euro has also improved against the dollar.

I don't honestly see how the markets view is any different to speculation, because as many commentators get wrong as those that get it right?

[nod]

A weak £ is not all bad in overall economic terms

Bristle Si


gotta agree....boost to exports, and UK manufactuers , improved balance of payments etc....don't see anything wrong with that type of basic economics

[HampshireRich]

To be quite honest I can't really make up my mind what is best for the pound against the euro if you live inthe UK - which ever way it goes there are the doom and gloom merchants.

As far as holiday money goes, if the exchange rate is 1.15 euro to the pound it costs me about £1750 for 2000 euros for the fortnight - if it 1.25 if costs me £1600 - only £150 difference so who cares?

If you spend a lot of time in CVO and your income is in pounds, then yes, I can see there can be bigger pressures on your spending power - £1500 difference on a 20,000 euro spend.

[Gary/Gaynor]

To be quite honest I can't really make up my mind what is best for the pound against the euro if you live inthe UK - which ever way it goes there are the doom and gloom merchants.

As far as holiday money goes, if the exchange rate is 1.15 euro to the pound it costs me about £1750 for 2000 euros for the fortnight - if it 1.25 if costs me £1600 - only £150 difference so who cares?

If you spend a lot of time in CVO and your income is in pounds, then yes, I can see there can be bigger pressures on your spending power - £1500 difference on a 20,000 euro spend.

Rich, lend us a £150 I mean who cares

Gary

[nod]

To be quite honest I can't really make up my mind what is best for the pound against the euro if you live inthe UK - which ever way it goes there are the doom and gloom merchants.

As far as holiday money goes, if the exchange rate is 1.15 euro to the pound it costs me about £1750 for 2000 euros for the fortnight - if it 1.25 if costs me £1600 - only £150 difference so who cares?

If you spend a lot of time in CVO and your income is in pounds, then yes, I can see there can be bigger pressures on your spending power - £1500 difference on a 20,000 euro spend.

dead right, over a two week break you're talking about a tenner a day diff...always amazes when people talk about not drinking or eating out as much because of prices in CVO, beer, restaurants etc...you're on your holidays..get out and spend and enjoy your self...you can be miserable for the other 50 weeks of the year at home

[EMM]

I was with a UK customer today a visit which coincided with a full load of material from Belgium.

THe truck driver is a regular and he cannot recall ever taking anything like a full load of exports back from the UK.
This idea that UK manufacturing is beneffiting from a weaker £ is a myth, we now manufacture very little that the rest of the world wants.
What a weaker £ does is reduce/delay the effect of imports from the rest of the world , protecting what is left of UK manufacturing.

[Matryx]

I was with a UK customer today a visit which coincided with a full load of material from Belgium.

THe truck driver is a regular and he cannot recall ever taking anything like a full load of exports back from the UK.
This idea that UK manufacturing is beneffiting from a weaker £ is a myth, we now manufacture very little that the rest of the world wants.
What a weaker £ does is reduce/delay the effect of imports from the rest of the world , protecting what is left of UK manufacturing.

A lot of UK manufacturing relies upon imported raw materials, so although exporting goods may appear cheaper, rising imported material costs squeeze the margin and eradicate much of the selling price benefit of the currency position. I operate in the UK manufacturing sector, and at present, domestic demand is strong. This is echoed by other people operating in other sectors. What happens when public sector spending cuts kick in is anyones guess, although I do agree it has to happen.

[HampshireRich]

Rich, lend us a £150 I mean who cares

Gary

Missed that - you have so much money you don't need it. Besides, it wouldn't fit in your wallet next to all those 50euro notes that have been in there for the last 2 years - try spending some!

Look forward to spending your money at the Blues Festival!

[Gary/Gaynor]

Oh well good old BOE talking down the pound again today just Im about to go over to Blightey Must be worth at least 2 or 3 HSB's in real terms. Looks like they are in for a bit more QE how quaint and Charlie Bean told people to get out and spend and eat into their savings what a total wanker

Gary

[EMM]

Just typical, talk the £ down put up prices on imported goods and commodities, slow everything down again.

Euro rebounded as Eurobank rates are expected to rise next year.

[EMM]

We have the announcement from the Irish Government of a 32billion euro bank bail out, the Spanish credit rating is further reduced.

Yet the euro continues to rise

[HampshireRich]

We have the announcement from the Irish Government of a 32billion euro bank bail out, the Spanish credit rating is further reduced.

Yet the euro continues to rise

Yep - this is what I have alluded to before - there is no logic to it - it makes no sense. It can only be either speculators buying the Euro in order to make a profit shortly or governments such as Gernamy buying Euros to keep the value propped up. I suspect the Euro will rise a bit more then go on a few weeks of downward movements.

[carvoeiro1]

Portugal announces austerity package
By Peter Wise in Lisbon

Published: September 29 2010 20:24 | Last updated: September 29 2010 22:35

Portugal has announced a new package of austerity measures designed to reassure markets that it will meet ambitious deficit-reduction targets and not seek emergency funding in a Greek-style crisis.

The measures include a 5 per cent cut in the public sector wage bill and a 2 percentage point increase in value added tax to 23 per cent, José Sócrates, Portugal’s centre-left prime minister, said on Wednesday.

The package was “absolutely essential to defend the international credibility of our economy”, he said.

Portugal, like Ireland, has seen its cost of borrowing rise to record levels this week amid market concerns that two countries could be forced to seek bail-out loans from the international community, triggering a new eurozone crisis.

The new measures have to be approved by parliament against a background of political bickering in which the centre-right opposition Social Democrats (PSD) has refused to support any tax increases proposed by the minority Socialist government.

However, next year’s government budget, in which most of the new measures will be included, could pass in October if the PSD abstains.

Fernando Teixeira dos Santos, finance minister, said an agreement had also been reached for Portugal Telecom, the country’s dominant telecoms provider, to transfer its pension funds to the state. This would result in additional budget revenue of €2.6bn this year, helping to ensure the government would meet its deficit target.

The austerity package also included a freeze on state pensions in 2011 and reductions of up to 25 per cent in social payments, which one leftwing opposition leader described as “brutal”.

Cuts in public sector wages, ranging from 3.5 per cent to 10 per cent, would affect workers earning more than €1,500 a month.

Earlier on Wednesday, tens of thousands of protesters marched in Lisbon and Porto as part of a day of European-wide trade union demonstrations against government austerity measures.

Mr Teixeira dos Santos said the planned spending cuts would reduce the budget deficit by 2 percentage points of gross domestic product in 2011 and the proposed revenue increases by a further one point of GDP.

Portugal is committed to cutting its budget deficit from a record 9.4 per cent of GDP in 2009 to 7.3 per cent and 4.6 per cent in 2011.

However, recent figures show the deficit to have increased by €400m in the first seven months compared with the same period last year, making Portugal the only peripheral eurozone member not to have made significant progress in consolidating its public finances this year.

Mr Sócrates announced the new measures as European Union leaders increased pressure on his government to send a clear message to international bond markets that it had the will and the capacity to control its public finances.

“It is important that Portugal doesn’t let us down,” said José Manuel Barroso, president of the European Commission, himself a former prime minister of Portugal. “It cannot deviate a millimetre from its budget commitments.”

The spread on Portuguese 10-year government bonds above equivalent German securities reached a record of 450 basis points on Tuesday, before narrowing to 437 basis points on Wednesday.

Also on Wednesday, the European Commission unveiled plans to impose heavy fines on fiscally undisciplined European governments in an effort to improve the way eurozone economies are managed after the Greek crisis that threatened to destroy the single currency.

The new austerity measures also came ahead of a meeting of EU finance ministers in Brussels on Thursday when Portugal was expected to come under pressure to adopt radical measures to reach deficit-reduction targets in 2010 and 2011.

The new austerity package is the latest in a series of emergency measures announced this year in an effort to discipline Portugal’s public finances.

In May, the government improved a 5 per cent pay cut for politicians and senior public sector managers as well as increases in value-added, income and corporate taxes ranging from 1 to 2.5 percentage points.
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