Central Banks & Their Impact on Currency Exchange and Your Property Investment

Currently, the European Central Bank is trying to allay fears over the lack of growth in the Eurozone. However, their efforts on the 3rd December were viewed as a bit limp by the financial markets. Traders and analysts were expecting something more shock and awe than the tinkering we received and, as the ECB didn't take much bolder steps to improve the money supply, the Euro strengthened in an ironic fashion.

If you are seeking to invest into the European property market, the Euro's 4% gain against the Pound and the US Dollar would have been disappointing but the EUR-USD rate is right in the middle of its 2015 range at this level and the GBP-EUR rate is a good 10 cents higher than where it started 2015.

So that's where we are and where we have come from but what does the future hold?

As with any forecast, there are caveats. At the moment we believe the European Central Bank will continue to loosen the money supply to try to kick start the lifeless Eurozone economy and, in the fullness of time that will make your European property investment more affordable. This is true as long as the Bank of England sits on its hands for the same time frame. If things worsen in the UK and the BOE is forced to consider rate cuts, that changes the posture considerably.

Against the US Dollar, the ECB's rate cuts and expanded QE should allow the Dollar to strengthen against the Euro but that too comes with a caveat. The US Federal Reserve is widely expected to raise the US base rate in December and another fall in the EUR-USD rate is contingent on the assumption that they follow through with that plan. If, however, the Fed gets cold feet and decides to delay rate hikes into the New Year, we will see some initial US Dollar weakness.

This is a tricky time in which not all global economies are recovering at the same pace – or at all in some cases. With so many justifiable reasons for volatility, managing the currency risk of your European investment has never been more important.

To find out how you can take advantage of positive fluctuations in the market and exchange your currency at the right time to get the best possible rate, call today on 020 7350 5474 or visit www.halofinancial.com

By David Johnson, Director, Halo Financial

@HaloFinancial