If you’re planning on buying a ski home this year, you’ll want to ensure that your purchasing power isn’t reduced by potentially thousands due to fluctuations in the currency markets.
To do this, consider the impact of the following factors and find out how you can protect your money in the midst of this uncertainty.
Cases of the Delta variant continue to rise in the UK and if hospitalisations and deaths also increase significantly, then it’s possible that the easing of lockdown restrictions could be reversed after July 19, which could impact the pound. However, the government currently seem confident that the NHS will be able to cope with the effects of reopening on July 19.
There has also been a rise in COVID-19 cases globally as the Delta variant becomes more prominent. This could impact the global economy, meaning that the currency market will also be affected. The dollar is already beginning to benefit from COVID-19 concerns, as it’s a safe haven currency that investors turn to in times of crisis.
As life in the UK reopens, investors will be looking for signs of economic recovery. Data releases will continue to be watched closely for an indication of how the economy is performing. Any data that misses or exceeds expectations could have an impact on currencies. This data could also provide clues about the Bank of England’s future stance on monetary policy.
News around travel is currently unpredictable, at best. The Delta variant is now becoming more prevalent in Europe, which could mean that more countries introduce tighter restrictions. As many European countries rely heavily on tourism, an increase in restrictions over the summer may be devastating for their economies.
Currency pairings could be heavily influenced by the actions of the Bank of England, European Central Bank, Federal Reserve and other central banks over the coming weeks and months.
The Federal Reserve and the Bank of England are expected to act broadly the same when tapering monetary policy. However, if the Fed are quicker to act than the BoE, the pound could weaken against the dollar. In its recent June meeting, the Fed shifted its expectations, saying that an interest rate rise is now likely in 2023, rather than 2024 as previously stated.
Meanwhile, the ECB looks set to only raise interest rates in 2024 – this slower action could mean that the euro weakens against the pound and dollar.
The next Bank of England meeting will take place on August 5. Any indication that interest rates will be raised, or monetary policy will be changed in the near future could have a positive impact on the pound. Equally, any cautious comments or a reiteration of the Bank’s current ‘wait and see’ approach could have the opposite effect.
How to protect your money
As an international buyer, the safest way to protect your money is by using a forward contract, which locks in the same exchange rate for up to a year. If you lock in soon, you will have the peace of mind that your money will be unaffected, whatever happens. Find out more here.
For more information about purchasing your perfect ski home abroad, don’t miss your free Buying Guides, covering the purchase process itself, the legalities, finances and more.