Euro Exchange Rate Outlook - GBP EUR Gains as Pound Sterling Boosted by Help to Buy Scheme

Modified: Tuesday, 23 July 2013 14:48 BST - Written by Toni Johnson

STORY LINK Euro Exchange Rate Outlook - GBP EUR Gains as Pound Sterling Boosted by Help to Buy Scheme

This morning’s session saw the British government unveil plans for phase two of its highly controversial ‘Help to Buy’ scheme which it hopes will boost the UK property market and get Britain’s house-building sector moving again. The proposals, unveiled by Chancellor George Osborne earlier, will allow prospective purchasers complete on any UK property with a value of under £600,000 by putting forward a deposit of only 5%. The government will guarantee a further 15% deposit, enabling property buyers to access mortgage finance and giving British retail banks the additional comfort they need to lend to buyers. Or at least that is the idea...

Cynics suggest that, with a UK general election due before May 2015, phase two of the Help to Buy scheme, which goes live at the start of next year, represents a last throw of the dice from a desperate government. Many leading analysts fear that the policy will fuel another massive property bubble which will inevitably end in tears. Albert Edwards, Head of the Global Strategy Team at French Investment Bank Societe General certainly thinks so – he described the scheme as the one of the ‘most stupid economic ideas of the last 30 years’, stating that it would burden young Britons with heavy debts for decades to come. Currency market participants were less negative about the government’s plans, and the Pound was generally supported reasonably well on the day. This saw the Pound to Euro exchange rate (currency : GBP EUR) climb to as high as 1.1649 GBP/EUR earlier before dropping back slightly.

Meanwhile, the Pound to US Dollar exchange rate (currency : GBP USD) lost ground on the day, paring to as low as 1.5321 GBP/USD a short time ago. A disappointing set of US Existing Home Sales for last month has caused investors to downgrade their expectations of near-term tapering of Quantitative Easing in the US, but the Greenback has still managed to perform well.

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