Expats feel the pinch as pound takes a battering

British expats drawing pension incomes in Sterling are feeling the pinch as their spending power contracts.

The pound only made significant gains against two foreign currencies in 2016 – the Egyptian pound and Mozambique metical.

While failing to keep pace with major currencies, Sterling did manage to lose around 20% of value during last year.

The biggest falls in value were against the Brazilian real (-28.4%); Russian rouble (-28%) and Icelandic krona (-27.9%).

Peter Reid, Expatriate Banking Director at Lloyds Private Banking, said: “The pound’s decline is bad news for Brits abroad, with most destinations becoming more expensive in 2016. Many British expats will also be feeling the pinch; those with incomes in Sterling such as pensioners are getting fewer pounds when converting their money.

“However, on the other end of the bargain, British expats living and working abroad and earning in foreign currencies are now getting more pounds for their money and they are seeing their spending power surge when they head back to the UK.”

Don’t blame Brexit for currency woes

The pound declined in value against 19 of the G20 developed nation currencies last year, except for the Turkish lira (+0.3%).

US dollar gained 17.0% against the pound, rising from $1.49 to $1.24. The pound finished the year at the lowest level against the dollar since 1984. Sterling fared better against the euro (-13.3%) as the Eurozone faced its own problems with the European Central Bank (ECB) forced to ease monetary policy further.

Analysts at Lloyds Private Banking, who prepared the comparison, also revealed Brexit did not seem to be a reason for the pound’s performance.

In the six months before the referendum in June, Sterling dropped in value against 54 out of 60 world currencies.

In the six months after the vote, the pound slumped against 51 of the same 60 currencies.

“Since the Brexit result, the pound has improved against five currencies and only fallen slightly against several more,” said Reid.

G20 currencies v Sterling

Source: Thomson Datastream

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