Which currency will win in 2018

Currency rates are one of the most essential issues to consider for expats, whether you’re living on a pension or annuity, thinking of investing overseas or back in the home country or just ordering something online form the other side of the planet.

Following exchange rates is a roller coaster ride, with relative values dipping and rising in relation to each other and occasional scary drops. In 2017, the US dollar hit the skids, affecting expats in the GCC and pensioners in Asia as well as expat investors holding capital. For the US currency, it was the worst year since 2007. On the other hand, the euro had its best year for a while, outpacing all other major currencies, and sterling actually gained a little after its spectacular Brexit-related slump.

Now that’s all over and the new year is here, what’s to expect in 2018? Some experts are predicting the dollar will rebound from its 12 per cent loss against the euro, citing Trump’s only 2017 win – the controversial tax bill – as a reason for overseas US companies’ possible repatriation of trillions of dollars. Others believe the dollar, along with the US’s’ economic might, may continue to fade due to the IMF’s downgrading its 2018 growth forecast to 2.1 per cent. Others believe the Trump tax reforms may force the Fed to aggressively raise rates causing another lift for the dollar.

Sterling’s 17 per cent fall immediately after the Brexit referendum was followed by an improvement against the dollar and other currencies with the exception of the euro. Now Brexit trade talks are about to begin, uncertainty is expected to ease, with some experts predicting a strong year for sterling. If inflation falls and domestic wage growth expands, a BOE interest rate rise could signal a further hike in the pound. Other market research analysts are also predicting a 2018 win for sterling, conditional on good Brexit news and am improving economic outlook. The elephant in the room is Brexit – should talks go badly the pound could drop against the euro by as much as seven percent.