Cyprus Mail 5 December 2020 - by Andrew Rosenbaum
The euro is getting stronger and stronger, and there are ways for the consumer to take advantage of this.
The European Central Bank keeps promising to do something about the strong euro, but nothing seems to happen (the central bank has also been promising for 10 years to do something about inflation so we can’t take their promises too seriously).
The euro is at a two-year high against the dollar, at 1.22 at this writing, it is headed for 1.25, the technical analysts, who look only at price movements, tell us.
“There is no doubt that the actions of the Federal Reserve have been hugely successful at weakening the value of the dollar since the spring this year,” writes Rabobank strategist Jane Foley in a note to clients.
The Fed has announced a policy of being less reactive to inflation, which only makes sense as inflation has remained at record lows for several years. This means that the US central bank isn’t likely to raise interest rates – this also makes sense because the US economy is tanking – and so there is nothing to prevent the dollar from sinking.
We await what actions Biden will take on the economy, but for now, there’s not much hope of change.
The euro, meanwhile, is strong thanks to the European Union’s very coherent stimulus plan and the appearance of some green shoots of recovery, and vaccines on the way.
All of this is just to say that the euro will stay strong for a good while. So why not take advantage of it as much as possible?
Buy British pounds
The first and most obvious action is to buy British pounds. You should only do this if you are prepared to hold them for a long time, because the pound is likely to remain low for quite a long time – markets have already priced in the ‘thin’ Brexit accord that is the best we can expect, so there won’t be a massive jump if one is ever announced. Sky
The British economy is in a parlous state, and that means the pound will stay cheap. Eventually, perhaps a year or two down the line, it is likely to go up again, so stick those GBP in a money market account, earn what interest you can get in the meantime, and pray that Boris Johnson goes away.
Buy British goods online
If you don’t feel like squirreling your GBP away, now’s the time to use them to buy British goods.
Sky News tells us that UK shops are slashing their prices in the run up to Christmas amid a crisis on Britain’s High Streets, according to a recent report.
Prices have fallen by 1.8 per cent in November compared with a year earlier, with fashion and DIY retailers most likely to have discounted their products, according to the BRC (British Retail Consortium)-Nielsen shop price index.
The decline in prices last month was driven by non-food products, which reduced in price by 3.7 per cent after a 2.7 per cent fall was recorded in October.
All of this is just to say that, if ever there were a time to get your Christmas pudding (which you are not likely to find in Cyprus) at an unbelievable price, this is it.
Buy imported goods in Cyprus
But you might feel strongly about spending your money in Cyprus, instead of sending it abroad at a time when the Cyprus economy is still recovering from the impact of Covid-19.
Fortunately, there is plenty of opportunity to buy imported goods while never leaving the country. Cyprus imports a vast amount of goods available in shops and online, and many of these will be cheaper thanks to the strong euro.
We’ll all be shopping for Christmas at this time of year, so it’s good to take advantage of the strong euro, and shop around for items you’ve perhaps wanted to buy for a long time, but haven’t quite wanted to spend as much. Many of these are likely to be cheaper thanks to the strong euro.
And what about travel?
When the euro is strong, of course, it’s a great time for foreign travel – that’s one of the key advantages of having a highly-valued currency.
A trip to New York or Los Angeles at the moment would be incredibly cheap, assuming we can go. One discount shop is offering Larnaca – New York roundtrip tickets at less than €300 – a fraction of what you would have had to pay last year.
And hotels and restaurants in places like Singapore, where the local currency (SGD) is weakening significantly against the euro, will certainly be much more affordable.
However, our desire to fill up on sushi on a quick trip to Japan is of course mitigated by travel restrictions.
These, however, are not insurmountable, so long as your destination is not on the no-go list. It’s just a matter of getting tested, and then allowing the time for something to go wrong (we’re all afraid that restrictions will change again while we’re on board a flight).
Should you have the time and the energy to deal with travel restrictions these days, the rewards are considerable, particularly as you can go to a better-class hotel than you might have otherwise, or to that expensive restaurant you normally wouldn’t have even on your bucket list.
We envy the Happy Few who can go abroad to get bargains and value. Who knows? Perhaps we can figure out a way…
