Navigating Currency Amidst the 2024 US and UK Elections
Originally posted on & updated on 8th November, 2024
As the United States navigates the outcome of its national elections, property buyers and investors are closely watching the resulting impact on global currency rates. Election results can cause significant volatility in the value of the US dollar, which in turn affects currency exchanges with the euro and other major currencies. This time around is no different with the value of the US dollar and stocks spiking sharply in the realy hours after the election results on November 6th. Such fluctuations play a pivotal role in property sales both within the U.S. and internationally, influencing investment decisions in sought-after markets like France.
In this blog post, we examine the historical trends following U.S. elections, the main economic drivers affecting currency rates post-election and strategic advice for property buyers looking to make the most of these uncertain times.
Historical Context
National elections have historically been periods of volatility for currency markets. For example, the 2016 US presidential election saw the dollar initially drop against major currencies before recovering as markets adjusted to the new administration’s economic policies. Similarly, the Brexit referendum 2016 led to a significant and sustained drop in the pound’s value.
Factors Influencing Currency Rates
Several factors can influence currency rates during election periods, including:
Political Stability and Market Sentiment
Elections often bring uncertainty, which can lead to market volatility. Investors tend to favour stable political environments, and any sign of instability can weaken a currency.
Economic Policies
Proposed economic policies, such as changes in taxation, spending, and regulation, can affect investor confidence and currency values.
International Relations and Trade Agreements
The stance of candidates on international trade, tariffs and relations can influence how investors perceive the future economic landscape, affecting currency rates.
Potential Scenarios and their Impact
US Dollar vs. Euro
In the US, the election outcome could lead to various scenarios. A victory by a candidate favouring increased fiscal stimulus and infrastructure spending might initially weaken the dollar due to concerns about higher deficits but could strengthen it in the long run if economic growth accelerates. Conversely, a candidate advocating for fiscal restraint and reduced government intervention might boost investor confidence, strengthening the dollar.
These fluctuations will directly impact Americans looking to buy property in France and in Europe, as a stronger dollar makes European real estate more affordable while a weaker dollar does the opposite. The US dollar surged to a five-month high in April as markets adjusted their expectations for Federal Reserve interest rate cuts this year. Just a few days after the election results, the US dollar has strenghtened against the euro, while demand from families in the United States is showing significant growth as families, expats and investors are re-evaluating their lives and options.
UK Sterling vs. Euro
In the UK, the election results are having a similar impact on the UK pound despite the recent budget announcements. The new government perceived as stable and business-friendly is strengthening the pound, making overseas properties more accessible to British buyers. The pound has recently surged to a rate of over €1.20 (08/11/2024), the highest level in months, possibly since April 2022. This rise has been attributed to a combination of factors, including improved political stability and signs of stronger-than-expected UK economic performance.
Additionally, the Bank of England’s cautious approach to interest rate cuts has supported sterling, especially against the euro, which has been weighed down by political uncertainties in the Eurozone. Take advantage of the strengthening UK pound and find out how you can save even more with our currency specialists. Did you know that GBP/EUR rates moved more than 7% in 2023?
Impact of Currency on Property Sales
National Impact
Domestically, currency fluctuations can influence property markets by affecting borrowing costs, investment flows, and consumer confidence. In the US, a weaker dollar might lead to higher interest rates, impacting mortgage affordability and slowing down the property market. In the UK, a stronger pound could attract foreign investment, boosting property prices, while a weaker pound might deter overseas buyers.
Overseas Purchases
Currency fluctuations can significantly affect Americans and Britons buying property in France, Spain, and other European countries. A stronger home currency increases purchasing power, making buying more expensive properties or afford additional amenities easier. On the other hand, a weaker currency can lead to higher costs and reduced budgets.
Strategies to Protect Against Volatility
If you’re concerned about how currency volatility around the election could impact you or your business, we can help. Our experts can help create a risk management strategy based on your needs. To mitigate risks associated with currency fluctuations, property buyers should consider several strategies:
Work with Currency Exchange Specialists
These professionals can offer guidance and secure better exchange rates than traditional banks.
Use Forward Contracts
Locking in a favourable exchange rate for a future date can provide certainty and protect against adverse movements.
Consider Fixed-Rate Mortgages
These can shield buyers from interest rate volatility resulting from currency fluctuations.
Property buyers and investors must stay informed and consider risk management strategies. By understanding the potential impacts and preparing accordingly, they can navigate this period of uncertainty and make informed decisions about their real estate investments.
To learn how to benefit from competitive rates for your international money transfers or talk to one of our expert advisers, visit our currency page for property purchases, regular overseas payments and business payments.
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