As another summer is consigned to the history books, our immediate attention now shifts to the autumn – although we’ll all harbour hopes of an Indian summer to help us through it. For many of us, autumn spells grim weather, no time off to look forward to until Christmas, and just the monotonous drudge of the everyday until then.
For some, this is all too much, and they’ll and go in search of something different – a new home in a new country – and the vast majority will never regret their decision. Indeed some have already made their move, and haven’t looked back.
One of expats’ main considerations is how far their money will go in their new country. Whether the exchange rate is in their favour can determine what they can get for their money. If you’re moving from the UK, a stronger pound means a better exchange rate, so mortgage and deposit payments will be lower when you’re transferring your funds. For those transferring pension payments to their new account, their money will go further.
Unfortunately for those selling sterling, the pound has endured a difficult August. This was in part down to some confusion around interest rate policy, which culminated in two members of the Monetary Policy Committee voting for an increase in interest rates. The Bank of England’s new focus on wages as part of its forward guidance plan also took sterling lower, as did volatility around the Scottish referendum. At the time of writing, GBPUSD is sat just below the 1.61 level for the first time since November of last year. Despite this negativity around sterling, it’s still up on last year, when GBPUSD was down at around 1.56. Back then, £300,000 would have got you around $468,000. Today, that same amount would get you about $483,000 – a difference of around $15,000. But Brits looking to move overseas will be looking for an upturn in the strength of the pound.
Interestingly, because the euro is going through a similarly tough time, the pound isn’t really suffering against the single currency. As GDP in the Eurozone in the second quarter stagnated, and as inflation continues to fall, pressure on the euro is likely to continue. In the last six months, GBPEUR has risen from as low as 1.193 in May 2014 to 1.264 at the start of September, which equates to an increase of over €21,000 on a £300,000 transfer. USDEUR is up from 0.72 in May to 0.77 at the time of writing. That’s an increase of around €20,000 on a $400,000 transfer.
USD is currently performing well, and has progressed from unwanted to roundly desirable. In the month of August, the dollar was 1.73% stronger than the pound, and at the start of the month was at its lowest level since September last year. For those working in the US and repatriating their salary, more of their money will be making it home. They may even decide the time is right to fix an exchange rate for their currency transfers going forward – what’s known as a forward contract – so they’ll always know what they’ll get.
AUD is looking in good health, despite the fact that the Australian dollar spent most of its month recovering from a devastatingly poor unemployment report that pushed the jobless rate to the highest level in 12 years. Though this in itself is a poor figure, full-time employment actually rose by 14,500, so it’s not all bad. Against the euro, AUD has gone from 0.65 in March to above 0.72 at the time of writing. On a AU$300,000 transfer, that’s an increase of €21,000 in six months. Against the pound, AUD is 2.39% stronger in the month of August, so a good time for Aussie expats to make the most of better rates when buying abroad.
Canadian volatility has subsided in the past few months, especially as news from south of the border has improved. In fact, news from the Canadian economy has also begun to look up apart from one, crucial area; inflation. CADEUR is up from below 0.65 six months ago to close to 0.71 at the time of writing, and in the same space, CADGBP has gone from sub-0.54 to above 0.5650.
Wherever you’re moving from, a continued slip in the euro is making buying property in Europe an attractive proposition, as you’ll get more for your money. The fresh start provided by a big move could be all you need to halt the autumn gloom.
Simon Hilton, senior foreign exchange consultant at World First