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LilMe1

Will the Olympic strengthen the Pound?

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I've seen in a previous post that the Olympics may have a positive affect on the exchange rate. I'm currently aiming to go to Oz around that time and I will need some money for living expenses when I get there. However I'm now wondering whether to wait to see whether there actually is a favourable affect on the exchange rate. I'm no financial expert so I would be interested to know anyones thoughts? ...

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I am no expert, but was chatting someone the other day whose opinion was that the olypmics are what done Greece over! As they ended up borrowing so much money to host it in 2004! Not wanting to put a damper on it, but maybe look into financial opinions online?

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I think I'll hedge my bets and change some before I go and some later ...

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Guest karan guest

Hi how do I start a new thread of my own

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Guest
Hi how do I start a new thread of my own

 

I've just replied to you so think you've worked it out :)

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I am no expert, but was chatting someone the other day whose opinion was that the olypmics are what done Greece over! As they ended up borrowing so much money to host it in 2004! Not wanting to put a damper on it, but maybe look into financial opinions online?

 

They're wrong, so don't worry about that

 

Greece has an endemic fiscal problem caused by a huge public sector, an issue with collecting tax, and extremely generous (well, until recently) retirement and pension terms of that huge public sector - lots of people routinely retiring with full pension at 50-55. A one-off capital spend for an Olympics is literally a drop in the ocean compared with that

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I've seen in a previous post that the Olympics may have a positive affect on the exchange rate. I'm currently aiming to go to Oz around that time and I will need some money for living expenses when I get there. However I'm now wondering whether to wait to see whether there actually is a favourable affect on the exchange rate. I'm no financial expert so I would be interested to know anyones thoughts? ...

 

I wouldn't rely on it. The man in the street thinks exchange rates are an analogue for how well a country's economy is doing but it's not really the case (eg, Germany has been doing just fine thanks for the past few years despite being the main economy in a currency zone - the Euro - that is relative to other currencies relatively low. In fact part of the reason they have been doing well is because of that, because a low exchange rate helps exports and therefore manufacturing, and this is a large part of the German economy)

 

The biggest driver of exchange rates is relative interest rates. You will see an improvement when the market thinks Aussie rates are likely to come down, and UK rates are likely to go up. The best chance of that happening is economic news in Australia that points towards a recession or low growth, and news in the UK that looks like healthy growth and especially if it looks inflationary. It's conceivable the Olympics could put an injection of spending in to the economy which will boost growth but it's likely to have negative effects too (people going on holiday/avoiding it in order to avoid transport and similar hassles, and this impacting the businesses they run/work for).

 

The experience of cities that have hosted Olympics in the past is mixed

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Guest The Ropey HOFF

I hope your right over the interest rate, the uk has been falsely keeping the interest rate low and the country is in a long drawn out financial crisis and the interest rate is high in Australia and they are booming financially over the same period. I don't care what it takes to get the dollar back up, a mini recession in Oz, we come top of the Olympic medals table, David Cameron bangs Julia Gillard in exchange for some job orders to boost the uk economy, anything will do, as long as the dollar rises in time for us To emigrate to recoup some of the money we have lost.

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Exchange rates seem to be a race to the bottom these days. The Pound, Euro and Dollar have all fallen against other currencies due to the weaknesses in their economies.

 

I can't see the Pound strengthening against other currencies until we see an economic recovery, and rising interest rates over here. The current consensus in the City is that won't happen before September 2014, and the date is continually being pushed into the future.

 

article-1607881-11BFB4D2000005DC-682_468x451.jpg

 

The other possibility is that the Australian Dollar falls. The economy is definitely slowing over there, a friend in Melbourne reckons that Victoria is in recession, and if their housing bubble bursts then things could get quite messy. Unfortunately you might not want to be Down Under if that happens...

article-1607881-11BFB4D2000005DC-682_468x451.jpg

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Thanks for your input everyone. I definitely feel more informed about when to change my hard earned savings.

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Depends how much David Cameron can pawn the two gold medals Team GB will win. :laugh:

 

My own advice is wait until you know you are going before worrying about the exchange rate. I don't expect the Olympics to have an effect though.

 

 

I've seen in a previous post that the Olympics may have a positive affect on the exchange rate. I'm currently aiming to go to Oz around that time and I will need some money for living expenses when I get there. However I'm now wondering whether to wait to see whether there actually is a favourable affect on the exchange rate. I'm no financial expert so I would be interested to know anyones thoughts? ...

Best Newcomer 2013-14.

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Depends how much David Cameron can pawn the two gold medals Team GB will win. :laugh:

 

 

 

I was waiting for such a comment. Team GB won 19 gold medals in Beijing but, for some reason, many people choose to ignore this. It would be a disaster if Team GB won less than 15 golds this time around. I wouldn't be happy with less than 20 golds. More importantly, I want more golds than Australia.

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If you don't need all the money when you emigrate then I'd suggest leaving it parked in Pounds, and see how the exchange rate varies. It might be a lot better in a few years, and if you're going over to a job then you probably won't need a huge amount to set yourself up, provided you're happy to rent for a while. (Australian house prices are another topic of conversation.)

 

I'd also suggest transferring your money in tranches, rather than all at once. This will help avoid any dips when the exchange rate fluctuates.

 

Lastly, compare a whole bunch of FX providers. I found that Oanda were the cheapest to bring some Euros back into the UK last year, though XE can also be good. Both offered me better rates than Moneycorp. Just don't get suckered into FX trading, as that's a mug's game, with most punters losing money.

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I heard a suggestion recently that the government are happy to keep stirling weak because of the olympics and to encourage visitors, and that it will be allowed to strengthen a bit afterwards. Don't know if it's true.

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As I thought, another 2 years then the UK will rise from the doom and gloom. Its been another 7-10 year Boom/Bust cycle as usual.

 

The Ozzy economy is far from doing well and is totally propped up from mining and Oil/Gas. Other industry is basically building houses, when housing goes under then OZ is FUBAR.

 

IMHO Ozzies let the gates open for a while and in flood the immigrants with their money and buy up the housing propping up this industry and its prices. It cant go on forever though.

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Quite right - but will it help the exchange rate?

 

I was waiting for such a comment. Team GB won 19 gold medals in Beijing but, for some reason, many people choose to ignore this. It would be a disaster if Team GB won less than 15 golds this time around. I wouldn't be happy with less than 20 golds. More importantly, I want more golds than Australia.

Best Newcomer 2013-14.

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The Olympics are not going to affect the OZ dollar exchange rate, in fact Fitch has downgraded the UK today explaining the UK is inextricably linked to the EU crisis. I think martync's analysis is right, it will be another few years before the economy in the UK starts to grow, but it is dependent on growth in the EU as well. The only threat to the Oz dollar is purely on a national economic basis. There is a massive real estate bubble in oz, nobody knows when it is going to burst, but when it does it is going to make for the mother of all housing collapses, when the hedge funds turn negative on a currency with a small population of 20m it will be devastating. A perfect storm is brewing at the moment, with the introduction of Gillards carbon tax lots of jobs are going to be lost and the cost of energy will sky rocket. Personal debt is also at an all time high in OZ and has one of the highest ratios in the global economy.

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As well as the housing bubble in oz, there is also the issue of a major slowdown in China - which will happen soon.


“Self-conceit may lead to self destruction"

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There's a piece over at the FT today about the flow of money from overseas into the Australia dollar, and being parked in bonds.

 

http://ftalphaville.ft.com/blog/2012/03/15/922241/the-aud-is-not-your-friend/

 

In short, there's a belief that the AUD is being driven up by foreign investors looking for a safe haven (with decent returns) to park their ill-gotten in. So don't expect any falls anytime soon, and it's not a good place for the economy to be in.

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Here's the simple version.

 

This chart shows that the Pound is at a ten year low against the Australian dollar. This is due to:

 

  • Quantitative easing and the 0.5% interest rate in the UK.
  • The resources boom in Australia.
  • Perceptions of the relative risks faced by both countries.

My take would be that:

 

  • The Australian dollar is at, or close to all time highs against the Pound.
  • Australian house prices are just coming off the peak of one of the last housing bubbles.
  • Things might not work out once you're over there, and you might decide to come home.

Hence my suggestion, above, be to park your money in the UK until either the Dollar is weaker or houses are cheaper. Ideally both.

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