We have often written about the importance of planning your currency transfers when looking for a ski-home abroad. The truth is, no-one can truly predict where the currency markets are going.
The economic disruption from coronavirus is a case in point – none of the banks could possibly have expected this and it’s very difficult to predict how the markets will fare over the next few months. So, what can property buyers and sellers do in times like these? We look at how COVID-19 has affected the main currencies of major ski markets and what it could mean for you.
The euro has had a strong month - its strongest month in nearly a decade against the dollar. A key turning point for the single currency was the coronavirus relief package, which was finalised in July and means that EU countries that have particularly struggled with coronavirus will receive funding to help their economies.
As the crisis unfolded, Europe’s handling of the virus, especially in places such as Germany and Greece, has been praised. This is all positive news for the euro, which has gone from strength to strength. However, recent economic data has been disappointing and any developments with this, and the European Central Bank’s stance, could impact EUR.
As the Swiss franc is a safe-haven currency, it typically does well in times of market distress. GBP/CHF, therefore, fell to record lows in March. However, recently we’ve seen global risk sentiment improve slightly, meaning that this pair could be staging a comeback after weakening at the beginning of the coronavirus crisis.
It might come as a surprise to some that the Swiss franc does not always follow the pattern of the euro religiously; it was in fact unpegged some years ago by the country’s central bank. Since the coronavirus crisis struck, CHF has strengthened significantly against the euro. Things could be picking up again for the single currency, however, as the markets begin to stabilise somewhat.
The dollar has been suffering lately against a whole host of currencies. At the beginning of the coronavirus crisis, it had been benefitting from its status as a safe-haven currency. However, rising infection rates, a stimulus package that can’t be agreed on and economic worries have all brought the dollar down. GDP figures recently showed that the US economy has fallen into recession due to closures caused by the coronavirus crisis.
A recent tweet by President Trump, which suggested that the upcoming Presidential election could be delayed, added to the climate of uncertainty in the US. For the dollar to recover, things may have to pick up economically, which looks like a tall order at the moment.
What does this mean for ski property buyers?
In this current climate of uncertainty, taking a chance on the currency market is extremely, extremely risky. Anyone mid-purchase who did not plan ahead could face the prospect of their home costing thousands more.
The economic aftershock of the coronavirus crisis will continue for quite some time. If you’re looking to buy this year, or over the next coming few years, you need to plan how you’re going to send your money safely.
For many people, that means a forward contract. This locks in the day’s exchange rate for the next twelve months. Anyone who had done so when the dollar leapt to a 35-year high, for instance, would have guaranteed that rate for themselves for the next year, even when the live markets drop.
In many ways, the problem is complex, but the solution is simple: removing your money from the live exchange markets. Learn more about how to buy safely in this volatile time with the Property Buyer’s Guide to Currency.