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Euro worries boosting strength of sterling

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By - Friday 07 May 2010

A strong exchange rate will normally lead to an increase in activity from overseas property investors as they look to capitalise on the potential to get 'more property for their money'.

Essentially, a country's exchange rate is influenced by the demand for the currency in international markets. If demand exceeds supply then the value will go up, whereas if supply exceeds demand then the value will fall.

Property journalist Marc Da-Silva recently claimed that until the exchange rates picked up it was unlikely that individuals would be purchasing a great deal of property overseas, but recent news and the financial situation in some eurozone countries has meant that the pound is slowly strengthening.

And with the uncertainty surrounding the current economic climate added to concerns over the long-term impact of the debt crisis emerging in Europe, opportunities abound for savvy investors to maximise returns on their money.

However, despite a recent strengthening of sterling, external factors are likely to have a large effect on the exchange rate in the coming weeks.

The situation is likely to be compounded by the result of the election and, although a number of polls are predicting a Conservative win, most are uncertain that they will get a large enough swing to avoid a hung parliament.

Ideally, the markets are hoping for a clear victory for one of the parties to avoid a potential stalemate for the economy and a bad situation for the exchange rate.

However, Geraldine Concagh, economist at AIB Group Treasury in Dublin, told Reuters that, although the election represented a key event for the market, more focus was being placed upon events transpiring in Greece and the potential of the situation to overspill into other European destinations and push the value of the euro down.

The cost of borrowing in the European destination has spiralled, with the public deficit well outside the three per cent needed to join the eurozone. This is likely to have a profound effect on both the economy and strength of the currency across Europe.

Today (Thursday May 6th) sterling reached a nine-month high against the weakened euro, with analysts citing the fallout from the Greek, Spanish and Portuguese crises as reasons for its loss of value.ADNFCR-3415-ID-19763065-ADNFCR

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.

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