The Strength of the Dollar Against the Pound: What it Means for Investors

As the strength of the dollar against the pound snowballs, UK property is becoming an increasingly attractive investment opportunity for overseas buyers.

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For several years, the US dollar has been on the rise while the British pound has continued to languish. And last week, the Sterling experienced its lowest level against the dollar since 1985. It fell as much as 0.9% to $1.1407 and is now at $1.1422, down 0.8%, according to Refinitiv data.

Additionally, the Euro fell to a twenty-year low against the dollar, sinking below $0.99 on the 5th of September.

The combination of a robust dollar (which also reached an all-time high against the Japanese Yen) and uncertainty in Europe is driving these fluctuations. The drop in these currencies against the dollar is providing overseas investors with increased spending power, allowing them to increase their European portfolios at attractive prices.

Updated 26/09/22: 

The UK Chancellor’s mini budget has led to a spike in concerns for the UK’s public finances. Subsequently, many woke up on Monday to find that the pound had plummeted to a new all-time low. Losing 4.7%, the sterling was trading at $1.035 in the early hours of the morning—which is the lowest it has ever been against the dollar.

The Sterling also dropped by 3.7% against the euro to €1.0787.

On the same day, the euro fell to a new 20-year low, falling below 96 cents against the dollar.


The Value of the US Dollar vs. The British Pound

The value of a currency is relative to others. When one currency goes up in value, that usually means that another has gone down in value in relation to it. This is what has happened with the US dollar against pounds and euros. The recent strength of the US dollar has made these currencies worth less when exchanged for dollars.

The rise of the US dollar has been driven by several factors. Firstly, the US economy has been doing well while many other economies around the world have been struggling. This has made investors want to put their money into US assets, which has driven up the value of the dollar.

Additionally, the Fed has been faster in raising interest rates than in the UK and Europe, making the US more attractive to those wishing to invest their money there as they can get better returns.

Opportunity for property investment

Though worsening inflationary pressures and the cost of living crisis, a low pound is likely to attract foreign investment.

A traditional safe haven for investment (thanks to a stable government and robust property laws) the UK has long been favoured by property investors around the globe—but it has been potentially expensive for them.

While UK property prices continue to rise, the relative value of the pound in relation to the dollar means that to international investors, UK property is cheaper than it was before. Therefore, as the pound nears parity with the dollar and the euro, it presents an unmissable buying opportunity for foreign investors who can now get more for their money.

Furthermore, a weakened Euro against the dollar enables US investors to add properties across Europe to their portfolios at extremely competitive prices. In some cases, these investments provide access to the EU through Golden Visa schemes.

For those wishing to take advantage of the strong dollar, now is your window of opportunity.

Contact us today to discuss lucrative property investment opportunities.