What's next for the Euro and dollar in 2012?

Wednesday, February 01, 2012

What's next for the Euro and dollar in 2012?

Top dollar?

The Sterling/US Dollar exchange rate is in stark contrast to the Euro; despite the fact the same factors are driving the value of the two currencies.

With all the well-publicised issues in Europe, global investors want security and often find this in the US Dollar, which is regarded as a 'safe haven' currency. With the current economic uncertainty, the USD has been getting stronger and stronger due to high demand. This has made it very expensive to purchase, and is currently very close to the lowest in a year.

While the EU debt crisis continues, most in the market don't see this situation changing. With uncertainty around the world, it's likely the US Dollar will remain expensive to purchase, which is not welcome for those looking to purchase using US Dollars.

If you plan to buy in USD, don't leave things to chance. There are ways to manage the risk involved when buying in different currencies, and taking control of your currency requirement at an early stage can mean significant savings. Don't leave it to chance as chance is not a reliable economic tool. Speak to specialist currency broker to find out the different options available to you, and ensure you make the most of your currency.

The euro

In the last month, Sterling/Euro exchange rates have surged to their best in 16 months. In just a few months the rate has increased by over 6%, effectively reducing the cost of a €200k property by over £11,000. So, why has the rate increased, and is it likely to continue doing so?

The recent jump is due to a very weak Euro, and is driven by fears that the Eurozone countries and their banks may be crumpling under the mounting pressure of their debts. As the crisis continues with no resolution in sight, world markets continue to shun the Euro, causing it to weaken. There is no fundamental strength in the Pound, although it has been helped by investors preferring the UK as a safer bet, given the UK deficit cutting austerity measures that are already in place and our AAA credit rating.

What will happen going forwards largely depends on if there is a resolution to the crisis. Some analysts think rates could continue to climb, while others cite weak UK growth as a reason to believe this spike is short term. Nobody can predict the markets, so the only real forecast can be based on past performance. This is the 5th time in 3 years the GBP/EUR exchange rate has broken through the €1.20 level, and each and every time it has been followed by a sharp downward correction. While nobody can foretell whether the same will happen in 2012, the hard facts are this: GBP/EUR is at a near 16 month high, and nobody knows if or when global markets will stabilise.

If you need to buy or sell Euros and don't wish to gamble on exchange rate movements, then speak to the Foremost Currency Group about the different ways we can help protect against any adverse exchange rate movements that could prove very costly indeed.


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