Euro / Pound
Written by Toby Fischer
In late August Mr Watkins had found a property in Europe for which he had a balance of 150,000 Euros to pay. At this time the  Euro reached 1.4900 to the pound, the property would have cost him £100,671.14
When Mr Watkins came to make the final payment in late September, the Euro had dropped back to 1.45, the result of which was a final price of £103.448.28 - an additional cost of a staggering £2,777.14 in four weeks.
Much of this loss could have been prevented by securing the rate with a forward contract. This mechanism is especially useful when market conditions are currently advantageous, but the currency is not actually required until a date in the future.
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Updated 5/01/05

The pound was stable against the euro, but was still within sight of a 15-month low. A survey that showed British manufacturing growth moderated in December also flustered sterling.

The Purchasing Managers Index (PMI) for manufacturing slipped to 53.7 last month from 55.0 in November and fell short of economists' expectations for a reading of 54.4, although new orders grew at their fastest pace in five months.

"The PMI for December wasn't as strong as people were hoping," said Aziz McMahon, foreign exchange strategist at ABN AMRO.

Today, the Confederation of British Industry will release a survey on retail sales activity in December, offering a snapshot of the strength of the retail sector in the crucial Christmas shopping period.

Sterling has weakened sharply over the past two weeks after the Bank of England hinted in the minutes of its last Monetary Policy Committee meeting that interest rates have peaked and may now fall. A series of negative data on the housing market has also hurt the currency.

The pound gained around eight percent against the ailing greenback in 2004 but was little changed against the euro.