As Britain attempts to realign itself after a period of tight fiscal restraints and failures within the banking sector, the ramifications have been felt in the financial markets.
Property in eurozone or the US
There was bad news for British seeking to buy French property, Spanish property, Portuguese property, among others, along with US property, as sterling fell to a six month low against the euro, and a four month low against the dollar.
In addition, the run into the next general election looms large on the political and economic horizon. However, the hysteria surrounding our senior banking figures, who make up the MPC, may have been unfounded as the immediate actions taken may have secured the strength of sterling in the long term as short-term prosperity makes way for consolidation.
The British pound/US dollar rate over the past year or so has been linked to movements in other currency pairs, most notably the euro/US dollar. The decline in the US dollar has wider implications on the world's markets, where two camps attempt to tussle for the mid-long term position of the dollar.
With the prospect of US interest rates remaining low for the foreseeable future, the dollar has been undermined, making US property more affordable. With global central banks looking to cover their risk and diversify there reserves, the outlook for the dollar remains bleak.
The trading range for the British pound/euro over the past economic year has left many financial commentators shocked at the pace at which the euro has shattered previous technical trading levels against the pound. However, Jean Claude Trichet, head of the European Central Bank, has openly questioned how long the eurozone countries can sustain these levels.
The doom and gloom around the pound has been replaced with a quiet optimism, with many economic commentators believing fair value in British pound/euro, of circa 1.25-1.30, returning as the economies realign to cope with their individual problems. This would make buying property in the eurozone far more affordable, once more.
Property in Australia and New Zealand
Australia and New Zealand, the two countries closely aligned to us as former Commonwealth members, have performed remarkably over the past year, as the balance of world industrial power shifts from the US to China.
Australia has proved to be a success story among a batch of failing economies. It has been claimed that the Australian property market and economy is as much as 12 months ahead of the other developed nations in the economic cycle. With unemployment peaking in early September, in stark contrast to the US and Britain, the increasing commodity demand from China has seen the Australian Central Bank become the first to raise its interest rates. A RBA spokesman stated, the "basis for such low interest rate setting has now passed".
The underlying reason behind the major shift in the New Zealand dollar and Australian dollar has been their high yielding status. Central Banks and major investors have looked to sell the US dollar and diversify their currency portfolios. However it is not all rosy. A slowing of the Chinese economy could have a profound affect on demand for Australian property and New Zealand property, among other goods.
With anyone exposing themselves to the volatile world of FX markets, as is the case with an overseas property investment, moving capital in stages understanding the reasoning behind the fluctuating exchange rates is extremely important in timing your venture into the markets.
Some information contained within this article may have changed since it was first published. HomesOverseas strongly advises you to seek current legal and financial advise from a qualified professional.