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Your Big Advantage In Europe

20 Jan
Golden summer sunrise with the tower of Fisherman's Bastion and green trees. Parliament of Hungary and River Danube

Your Big Advantage In Europe

Two weeks after Trump was declared the victor in last November’s presential election, the dollar surged to a one-year high. It’s held its strength against its major peers ever since.

Today, Trump takes office and a flurry of announcements are expected to follow on from the inauguration.

Despite rumblings of tariffs and tax cuts inviting a dollar crisis, word on Wall Street is that Trump will in fact fuel further dollar gains.

According to chief investment officer at Franklin Templeton Fixed Income, Sonal Desai, “Most of the policies Trump is talking about will actually be dollar positive —not dollar negative.”

Over at Barclays, Ajay Rajadhyaksha, chair of global research, concurred saying, “the Trump policies are definitively dollar positive.”

Goldman Sachs, Morgan Stanley, and UBS have all forecast a continued rise for the dollar while Deutsche Bank has predicted it will reach parity against the euro this year.

Which brings us to Europe…

I took my first trip to Europe in 1985.

I was 16 years old and had saved up my dollars for more than six months to pay for the 30-day, 9-country tour.

While I understood that every country I’d be visiting used a different currency, I didn’t realize that the U.S. dollar was at an extreme high against most currencies around the world at that time. It was accidental but fortunate timing, as it made the trip affordable for me.

It wasn’t until 13 years later that currency fluctuations significantly impacted my life again.

When Kathleen and I moved to Ireland, the currency was the Irish punt. The euro was introduced a year later at fixed rates of exchange against the 12 currencies it initially replaced. For several years, the Irish required prices in store windows and on restaurant menus, for example, to be shown in both punts and euro. People had to get used to the new money.

The exchange rate between the euro and the U.S. dollar started at $1.16… and it fell from there. It bottomed out at 84 cents and remained below its $1.16 launch point for four-and-a-half years.

The euro continued to appreciate for five years after breaking through the $1.16 mark, eventually reaching $1.59.

From 84 cents to $1.59… a near double.

Today the euro is hovering around $1.03.

I got lucky in 1985 when I took advantage of the strength of the U.S. dollar and embarked on my first tour of Europe.

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Today, again, I and every other dollar-holder find ourselves in a fortunate position. But, this time, my plans as a result are not at all accidental.

I’m aggressively targeting investment opportunities to take advantage of the weak euro.

Indeed, I’m shopping sterling opportunities, as well… as the U.S. dollar is trading against the British pound at $1.21—a 14 month low for the pound which is set to remain under pressure against the dollar this week as Trump takes office.

For me, buying euro- and pound-priced hard assets right now is an urgent agenda. I don’t want to miss what qualifies as the currency window of our lifetimes.

How long will it last?

I’ve never tried to predict currency movements. The only thing I can tell you with certainty is that, eventually, the U.S. dollar will weaken against the euro and the pound.

No one can say when for sure… though many will try.

I prefer to take action and enjoy this advantage in Europe while I can.

Stay diversified,

Lief Simon

Lief Simon

Editor, Offshore Living Letter