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Volatile European Currency Markets to Remain

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Property Investment  Currencies  Market Volatility 

By - Thursday 27 May 2010

The unpredictable currency markets over the past month have kept traders entertained and many economists are predicting that more volatility is to come. The euro in particular has been attracting much sceptical feeling, with fears that some European leaders are not fully supportive of the recent bailout measures.

Furthermore, there still remains concern that other countries whose public finances and deficit remain high could be swept into financial worries, making the chances of a short-term fix to solve the underlying problems unlikely.

Stuart Thomson, chief economist at Ignis Asset Management, is confident that the coming weeks will provide the euro with a degree of respite, with the bailout plans of EUR110 billion and EUR750 billion offering a break from any immediate liquidity threat.

Long-Term Prospects

However, the long-term picture for the currency may not be so rosy. Mr Thomson suggests that the currency could eventually reach parity with the ever-strengthening dollar by the end of 2011.

Meanwhile, Sterling has found itself dropping to a 13-month low against the dollar as investors look to the currency as a safe haven. And while investors wait for news to emerge from the emergency Budget on June 22nd, its long-term position remains unclear.

Alistair Cotton of Currencies Direct explained: "Sterling sentiment remains weak, so expect the pound to come under further pressure as risk is taken further off the table."

Future Growth in Property

However, the doom and gloom surrounding the currency markets may well present investors with a buying opportunity. While sterling remains weak against commodity-backed currencies, such as the US dollar and Australian dollar, it has gained recently against the euro.

This has led to an increase in buying power for British investors and in turn an increase in interest from individuals looking to invest in property in eurozone destinations.

In fact, Eugene Philips, managing director of research and investment strategies at ING REIM Europe, said that the future was looking bright for the major European real estate investment markets, as alongside the positive yield spread of property over government bonds, ING economists are forecasting positive growth in most European countries again.

"Modest economic recovery will support property occupier demand from 2011 onwards, which should underpin the momentum of the upturn that has been led, so far, by the real estate investment markets," he added.ADNFCR-3415-ID-19799069-ADNFCR

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