What does the tapering of stimulus mean for Expats and their money?
Over the past six months currency market movement has been driven by speculation surrounding the prospect of major world economies reining in the stimulus measures introduced to kick start economic growth.
The quantitative easing measures introduced by nations like the US have not just supported the economies of the countries themselves but have also pumped money into emerging market nations like South Africa and India. As a result, indications that the US intends to trim stimulus in the months ahead have dampened the prospects of India etc and caused a considerable weakening in currencies like the Rupee.
Furthermore, as quantitative easing typically causes the currency of the nation deploying it to fall, the US Dollar exchange rate is likely to recover losses and gain on its rivals over the course of next year as the level of bond buying is reduced.
This means that US expats living in countries like South Africa but receiving a wage from the US will be much better off, receiving considerably more Rand for their Dollars then they do at the moment.
Similarly, the UK economic recovery seems to be going from strength to strength while countries like Australia and Canada experience patchy growth at best.
With the UK performing so well the odds of the Bank of England introducing any additional easing measures have fallen sharply, and it seems that interest rates will be lifted from record lows sooner than expected.
For UK expats this is good news as it means that the Pound is likely to strengthen against the Australian and Canadian Dollars, allowing expats in those nations to get more for their money.
On the other hand, expats living in the Eurozone may be feeling the pinch for some time to come as persistent unemployment, deflation fears and political concerns keep the Euro under pressure and leave the European Central Bank ready to take further supportive steps, such as introducing negative interest rates.
As the New Year approaches keep up to date with the latest economic and currency news. If you’ve got a big foreign transfer coming up timing your trade right could make a massive difference, so if the tapering of stimulus effects you be sure to factor it in.
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