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Money & Rights

Can Expats Expect The GBP To Recover Against The EUR This Year?

We’re currently living through a time of great political and economic uncertainty, and that can make times tough for expats because of a fluctuating exchange rate.

2016 was a rough year for expats, as GBP reached lows of a 1:1 exchange rate with the euro briefly. So, will things look better in 2017? In this post, we take a look.

What Does 2017 Have In Store?

Well, it looks like good news may be on the horizon. Recently, Barclays bank announced that they’re expecting a recovery in the GBP/EUR exchange rate throughout 2017.

This is because, shortly after the shock referendum result was announced, the bank believes that there was a kneejerk reaction from investors, which meant that GBP was oversold.

The rise in value of the pound against the euro in 2017 is likely to be a reaction to this, as political sensitivities are likely to weigh on the euro while the oversold pound corrects in value accordingly.

Back in January, the GBP/EUR exchange rate was around 1.36, but this had fallen to around 1.06 in late summer, at a significant cost to expats; especially those reliant on a UK state pension.

GBP Continuing Bounce from Q4 2016

In truth, this early 2017 bounce is hardly unexpected. As disastrous as 2016 was for GBP, the currency has been in recovery mode since the early part of November. This is because investors on the foreign exchange market, such as those using FxPro, have turned their attention away from Brexit and towards the US and the administration of President Trump.

In addition, 2017 also looks set to be a year of incredibly high political tensions in the EU, as many of its constituent countries head to the polls. The situation in France, in particular looks incredibly interesting, as it could also be set to elect a far right leader with an anti EU stance, Marie Le Pen.

All of this means that, by the close of the year, the pound had rallied to a two-month high of 1.17 on foreign exchange markets. For those simply making international payments, it hovered around 1.12 to 1.15 depending on the broker.

Is it all Rosy?

However, even though the forecasts appear positive, that does not mean that the outlook is entirely rosy. After all, many of the threats that caused the pound to post losses against the euro are still in play.

It appears from Theresa May’s comments that the UK will pursue what commentators are calling a “hard Brexit”, which is a fear that initially weighed on GDP. However, until the Prime Minister triggers Article 50 (the Bill allowing her to do so is currently passing through the House of Lords), and the negotiating on the UK’s withdrawal properly begins, it is unclear whether this will be the case.

As a result, a great amount of uncertainty remains in the markets, so it’s unlikely that the picture will become too rosy in 2017. Overall, it looks as though it may be far better for expats looking for good exchange rates than 2016 was, but it’s unlikely we will see large spikes in value.

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