By Paul Newfield
After a tumultuous 2025 all round, is this year expected to deliver any respite? Lets find out by exploring the US Dollar and its impact on the buying of Euros.
In 2025 the three major currencies had quite the differing fortunes, with the US Dollar weakening significantly. This is largely due to political reasons, although the interest rate policy of the Federal Reserve and their opposite numbers in the EU and the UK also had significant impact, while at home the economics of the US are seemingly becoming more embroiled in the political push of the elected government and what they want to achieve in 2026.
Over the past twelve months the Dollar has recorded its worst loss since 2017, losing 9.4% of its value, in large part due to the world-wide tariffs put in place back in April. By contrast, the Pound actually was up 7.6% and the Euro was up 13.5%. Perhaps surprising to some, but we have seen GBP-USD rates improve significantly. Commonly, when the strength of the US Dollar weakens it motivates investors to sell off their positions and invest, instead, in the Euro or even in alternative options like gold, silver or stocks, all of which have seen impressive returns in 2025.
Federal Reserve head Jerome Powell had started dropping interest rates slowly in autumn 2024 with three cuts in 2025 alone, currently resting at 3.75%. This is where the uncertainty and political instability comes in to play – Donald Trump, in yet another of his infamous soundbites, has said that Powell is “grossly incompetent” and speculated as to whether he would be fired in the first month of this new year. The reason? Trump wants interest rates dropped further and more quickly.
Were the scenario of Powell’s sacking to play out, then Trump would almost certainly place someone, in charge of the Federal Reserve, more conducive to his desired outcome. The reasoning behind this is likely that the US wants to produce more of its own goods with a view to a large surplus and exporting more to the rest of the world, which a low interest rate would certainly help with.
However, the lower an interest rate the less likely and less attractive investing in that country or economic/monetary system is, as the returns would be less favourable. A drop-off in that currency then, almost inevitable.
A lot of you will no doubt be planning your property purchase in Europe this year, be it in Spain, Portugal, France or elsewhere. What all the above means for you is that with a weakening USD, a strengthening Euro, and despite a strengthening Pound, it is likely that the cost of your property will increase. To mitigate this risk, get in touch with us and speak with one of our friendly and knowledgeable currency consultants about locking in and securing a rate for up to a year or more into the future.
With little in the way of economic data until next week, it may be the perfect time to get in touch while it is relatively quiet. From me and everyone at A Place In The Sun Currency, have a prosperous 2026.