On August 26, 2022, the European currency recorded a decline in value against the dollar. We are talking about a historic event that sets the tone for foreign investors seeking new opportunities for returns in the old continent.
The European Central Bank has established measures taken by President Christine Lagarde to contain inflation, the reality is that this phenomenon aims to standardize the value between the two currencies in the coming days given the current energy crisis throughout the European Union.
Although this event has caused many people to start taking refuge in the strongest currency, the dollar, there is also a stream of investors who see Europe as a new opportunity to acquire assets now that the local currency has fallen in value.
Are there economic sectors in Europe that could benefit from this drop in the value of the local currency?
The answer is yes, and it is mainly limited to tourism and real estate. Let’s look at it in more detail below:
Tourism
It is no secret that the vast majority of people in the world prefer to choose a tourist destination where their currency is more valuable in conversion. While European citizens will see their euros worth less when converting on U.S. soil, the reality is that this will be the opposite for tourists from the rest of the world in countries such as, for example, Spain.
This is not as negative as it might sound, as the European tourism sector will see strong revenues given the tourism and economic attractiveness of the current exchange rate.
Real estate
For years, it has become highly attractive for families and investors to allocate part of their assets to invest in land, offices, stores, houses or apartments in cities with a high degree of economic projection, given the important cultural, social and industrial development in most cases. Or on the other hand, in cities that are already consolidated and with an aspirational spirit for the general population.
In that sense, today’s drop in the Euro means a huge opportunity for investors around the world looking to acquire property in one of Europe’s most representative and desirable cities or neighborhoods.
This investment opportunity for the world benefits U.S. investors and, mainly, investors in emerging countries such as Mexico and Brazil, where local currencies are better resisting inflation against the U.S. dollar. *
Will the Euro continue to decline in value?
There is no certainty to this question, as the U.S. Federal Reserve becomes more aggressive in every decision it makes vis-à-vis the European Central Bank.
The best recommendation for investors would be to acquire an asset today that represents gains in the medium and long term, such as investing in the real estate market. Historically we have seen that the countries that make up the European Union are able to stabilize their economies and achieve an idyllic standard of living for the rest of the world, so buying here today represents great gains for tomorrow.
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*Source: El País
