A new Black Monday
It’s been another volatile period in the currency markets, with global currencies experiencing uncertain swings across the board.
On Monday 24th August, now known as ‘Black Monday’ in reference to the global stock markets crash of 1987, the fears that had arisen since the Chinese Central Bank’s decision to devalue their yuan earlier in the month finally came to a head. A mass loss of confidence in the majority of the global stock markets caused significant movement across the financial world.
Commodity backed currencies were the hardest hit by these events, due to their trade ties with China. The huge trading and investment links between America and China for example, meant that investors were pushed to leave the US dollar and flock to the safer currencies; this led to the US dollar weakening dramatically against many of its peers. It remains to be seen whether this will have an effect on the Federal Reserve’s ongoing talks to raise interest rates.
Sterling has experienced a mixed bag of effects – pushing higher against the US dollar and commodity-based currencies, but tumbling to a four-month low against the euro. Seemingly inconceivable just a few short weeks ago, the euro emerged as the winner of the day; it was able to build on the strength that had been gleaned from the positive sentiment coming from the Eurozone as investors bought the single currency as a safe haven.
For those of you interested in purchasing property in Europe, keeping an eye on these rates is important. Sterling has experienced unrivalled strength so far this year, and we have regularly discussed just how much less the cost of a house here in pounds is now compared to January or even December. Now however, the euro’s strength could indicate the end of this run of domination for the British currency. On Monday 17th August, a €250,000 property in Europe would have cost £176,966 at a GBP/EUR rate of 1.4127; as the markets opened on Monday 24th August, the GBP/EUR rate had sunk to 1.3643, meaning that same property would now cost £183,244 – £6,278 more in just one week.
If you are concerned about the effects that ‘Black Monday’ or any other currency movements could have on your international transfers, register for an account or speak to your trader today for expert currency guidance to navigate through this volatile market.