Could polical change affect the value of your French property?
French property buyers’ fortunes are now tied to the Twitter feed of the leader of the most powerful nation on earth
Before 2016, Donald Trump’s campaign for the presidency was seen as a publicity stunt. As we edged closer to November, he was a credible candidate with the potential to win. With 2017 and his inauguration over with, French property buyers’ fortunes are now, in part, tied to the Twitter feed of the leader of the most powerful nation on earth.
With America’s standing in the world economy, and with the foreign exchange market being the largest market of them all, there will always be ripple effects. In this case, for the value of the euro, the value of the pound, and therefore the ‘real value’ of the French property you are buying or excitedly waiting to view.
Look back at Brexit
One crucial aspect of Brexit to remember is that, whatever your personal politics, financial markets were visibly upset by the news. Historically, they have been loath to sudden and significant changes to the status quo, and they showed their displeasure repeatedly since last June with large depreciations in the pound’s value.
Since then the pound has recovered to healthier levels compared to last October, and French property buyers can lay some of their thanks at the feet of the controversial president himself. Once he won the election, pound to euro exchange rates rocketed by over four cents in just three days. The reasoning behind the sudden surge of support was due to Trump’s very vocal and unwavering support for Brexit.
Having an ardent Brexiter at the helm of the US economy gave enough confidence for investment in the pound to rally once more, and the knock-on effect saw its value rise against the likes of the euro to the benefit of anyone planning to use their saved or loaned sterling to secure a property across the Channel.
Since then we have seen a few other occasions where his actions have made French properties cheaper for Uk-based buyers. Theresa May’s state visit to the US in January, Trump’s allegation at the euro’s value as being purposefully devalued by Germany, and his affirmation that a trade deal between the US and the UK could be established within a short 90-day period have occurred alongside positive rallies on GBP/EUR – showing clear parallels between Trump’s actions and the improvement of the pound’s fortunes over the unfortunate euro.
More to come?
The current debate is whether the Trump Factor will continue to bite on currency markets, or whether his continued barking will end up being seen as all talk and fade into the background.
His powers have been put in check with executive orders being challenged and a historically long battle on the confirmation of his cabinet. He faces a battle over his wall and finding an alternative for Obamacare. Some are saying he will be so preoccupied at home that his winning intervention in European affairs which has so far assisted euro buyers may slow from a flood to a trickle.
One thing can be guaranteed: we have little clue what Trump may say tomorrow. With this unprecedented engagement from a sitting president with the media, and by extension financial markets, we will all be kept on our toes over the next four years.
A look to Europe
The last few years have seen the largest swings on record for pound to euro exchange rates. In 2015, the Greek debt crisis allowed GBP/ EUR to climb to multi-year highs around the 1.40 mark. 2016 saw the spotlight shift towards the UK, with the shock of a Brexit vote seeing the pound fall against the euro to below 1.10. This year is already showing signs of more balanced focus by currency markets in the two areas.
The ‘year of politics’ is a term you may have heard thrown around on the news, and highlights just how many forks in the road the Eurozone will be facing this year. Elections are to be held in the Netherlands, France and Germany, with Italy also potentially facing earlier voting from the original 2018 schedule. All of which face the potential challenge from anti-eu parties to gain power.
The euro’s value is tied to the image of the stability of the Eurozone, which has seen regular challenges in recent years, and these now appear to be coming to a head. The potential for Greece to leave the Eurozone and default on its debts in 2015 saw the euro’s value plummet in similar fashion to what the pound experienced last June with the Brexit vote.
It is important to remember that it is only speculation that such elections may lead to further referendums on EU membership, and that the timescales involved for such processes are very long. This will be an evolving story which will continue to affect the budget of euro buyers this year and, as such, it is imperative that you remain an informed purchaser in order to secure a competitive rate you are comfortable with for your currency transfer.
Currency exchange brokers offer proactive services to keep you updated on changes in the political landscape and how this may impact anyone with a financial obligation coming up to complete on a property, or even to help those budgeting on properties they will be viewing shortly.
If tempting levels to buy are reached during this tumultuous period, but you are not quite ready to complete on a property, you also have the option to pre-book your currency for a future purchase at levels available on that day. This avoids your budget changing every few seconds alongside the currency markets.