Euro Unlikely To Bounce Back Against The Dollar

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Expats paid in US dollars or the euro can expect to see huge changes in their fortune over the coming months, according to foreign exchange experts.

Diverging economic policies on both sides of the Atlantic see Washington ready to raise interest rates, if smoke signals sent out by the recent meeting of the US Federal Reserve are interpreted correctly.

While in Europe, the European Central Bank is still printing cash to prop up poorly performing economies with more quantitative easing.

The Fed and Washington, along with the UK, will say been there, done that, got the T-shirt as the recovery in Europe lags the other two.

Expats to renegotiate benefits

For expats on assignment, economic growth in the US and stagnation in the Eurozone give completely different outcomes.

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“The euro lost 25% against the dollar a year ago when the paths to economic recovery started to diverge in the US and Europe,” said Andy Payne, economic analyst at ECA International, an international human resources consultant.

“Although the euro has put around 10% of that back on in the meantime, the euro is weakening against the dollar and is likely to drop back even more over the coming months.”

Payne explained that foreign exchange fluctuations between the dollar and euro can make a big variation in pay packets and lead to cost-of-living adjustments and many expats may be looking for a salary review as the dollar grows ever stronger.

Poor performers against the euro

Generally, the euro has had a tough time against most other currencies.

The US dollar is 12% up on the past year, closely followed by the Swiss Franc at 10%, with Sterling and the Chinese Renminbi both up 9%.

The net result is retired expats in the Eurozone are feeling the pinch as much as overseas workers and will see their spending power tail-off against the Pound, which is expected to grow stronger with the dollar.

If you are in the Eurozone and fancy a cheap holiday, Turkey is one destination, where the lire is 16% down against the euro this year.

If you fancy a trip further afield, the Brazil real is 31% down against the euro and the weather is supposed to be good at Christmas.

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