Now the election saga is over how will currency transfers to France be impacted?
- Credit: Archant
Since the election GBP/EUR exchange rates have been stagnant, but how will the new weakened government and uncertainty over the Brexit negotiations impact the markets and exchange rates?
We’ve been in a complete state of limbo since the election. Over the past three weeks buying rates for Euros have only seen a difference between the best and worst levels of 1.3 cents. In my years in the foreign exchange industry I have rarely seen stagnation like it.
The effects for prospective French property buyers are still very real. A 1% movement, which is just over 1 cent can make a difference of approximately £2,000 on a €200,000 purchase. However, there are normally larger benefits from a well-timed transfer, and we may be entering a period where greater volatility begins to present greater opportunities for a bargain with French properties.
New Government, new Brexit?
Markets were in limbo since the election as they were unsure what the ramifications were for a weakened UK Government in regards to the Brexit negotiations and their aims.
Will the Government be humbled by the clear rejection by the majority of the country on their Brexit goals? Will their weakened mandate actually make it quite difficult to deliver a hard Brexit with positive terms for the UK economy?
The course of action the Government takes will certainly have a bearing on the Pound’s value, and, therefore, the cost of your French property.
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We have seen time and again since the Referendum that severe steps and calls for a hard Brexit have harmed Sterling, as markets recoil from the fear of the unknown the UK economy will be stepping into. Traditionally markets prefer stable conditions where the status quo is largely preserved. Comments of a softer Brexit approach have traditionally bolstered Sterling over the past year.
There were strong hints from David Davis, the Brexit Secretary, that concessions would have to be made in the immediate aftermath of the election. This was one of the reasons why the Pound saw stability and even marginal gains against the Euro despite political turmoil.
With the talks underway we will continue to see hints and clarifications. Prospective French buyers with an interest in the Euro may see further improvements as markets receive the information they continue to wait for one year after the Referendum vote.
A helping hand with interest rates?
Whilst Brexit will continue to be a dominant force for governing Sterling’s value, the negotiations will no longer be a day-to-day factor in rate movements. We will likely receive a few updates a month, which leaves a gap for currency exchange rate volatility to be filled. The economic arena, which has been largely eclipsed since the Referendum last year, may now be coming back to the fore.
Murmurs of interest rate rises have suddenly been buzzing UK headlines. After multiple cuts to rates since the financial crisis, we may now be seeing the first interest rate rise since those dark days for the UK economy.
The reason behind the hike is more damage control than a vindication of how robust the UK economy is. It is a tool to control rapidly rising prices in the UK, largely brought on by a weaker Pound and rising oil prices. Either way the effect on the Pound is the same, a higher interest rate means it is a more desirable currency. French property buyers should see a helping hand then if a hike does emerge. In June the UK came the closest to a hike since the financial crisis, with a 3-5 vote split in favour of a hike from the Bank of England Monetary Policy Committee.
Again developments will continue on a monthly basis with these meetings, so if you are currently viewing properties you may find your budget continuing to stretch just that bit further.
How to approach the markets
Whilst the outlook is now more positive for the Pound after the initial panic with the election result, the landscape can still change quite quickly. Labour leader Jeremy Corbyn is bold enough to state that he will be the new PM in 6 months.
Being in contact with a currency broker offers you the opportunity to be kept abreast of the latest currency movements and trends, as well as providing you a thorough overview of your options to avoid being caught out in a volatile marketplace whilst you search for your dream home abroad. The fact that they are there to offer bank-beating exchange rates is another plus to buyers trying to minimise the cost of their purchase.
More about Foreign Currency Direct
Foreign Currency Direct is a leading UK currency exchange brokerage. Established in 2000, Foreign Currency Direct is dedicated to offering the highest levels of customer service, that’s why each client is assigned a dedicated currency broker, someone who understands your unique situation and works tirelessly to gain the maximum value for every currency transfer.
Learn more about Foreign Currency Direct plc at: www.currencies.co.uk