2026 FX forecast: And what it means for the global property market

Fluctuations in the currency market rarely make headlines in the property sector until something breaks. Yet it's hard to avoid the fact that exchange rates have a unique way of rippling through the international real estate market, altering purchasing power overnight and changing the calculus for overseas investors.

In 2025, we saw how heightened geopolitical uncertainty, a fragmentation of global trade and central bank divergence drove significant volatility in the FX market and filtered through into the property market.

As we look forward to 2026, we examine persistent and emerging trends likely to influence currency movements over the next 12 months and the implications for global property markets.

USD: In a tailspin?

The US dollar faced notable resistance through 2025, with the dollar index declining by roughly 9% year-on-year and USD exchange rates plunging to new multi-year lows as President Donald Trump’s flexible approach to policy eroded confidence in the currency.

The shock US military intervention in Venezuela, just three days into the new year, points to an administration that will remain a major source of risk through 2026.

US monetary policy could also add to the pressure. Markets continue to price in additional Federal Reserve easing in 2026 as the labour market shows signs of cooling and tariff-related inflation appears less persistent than initially feared.

Downside risks to the dollar could intensify if Trump ally Kevin Hassett emerges as Jerome Powell’s successor when the Fed chair’s term expires in May 2026, given his perceived alignment with Trump in favouring looser policy.

That said, the dollar still has meaningful sources of support. US growth continues to outpace much of the G7, and persistent geopolitical uncertainty is likely to sustain safe-haven demand, factors that could temper downside risks and leave room for intermittent rebounds in the US dollar.

Impact on real estate investment

A weaker US dollar may fuel foreign demand in the US property market in 2026, as international investors enjoy greater purchasing power, particularly as rising unemployment could limit domestic demand and further suppress prices. At the same time, US outbound investment flows may moderate if heightened economic uncertainty and weaker confidence encourage investors to remain closer to home.

EUR: An uncertain future

After outperforming many of its peers in 2025, the euro enters 2026 with a more mixed outlook.

One potential tailwind is policy divergence between the European Central Bank (ECB) - which is forecast to leave interest rates on hold – and other central banks.

However, the ongoing conflict in Ukraine remains a key source of risk for the euro in 2026.

As the war enters its fourth year, fatigue amongst Kyiv’s allies has become increasingly visible. This is particularly notable in Washington, and any signs the US could materially step back would likely heighten European security concerns and alarm EUR investors.

On the other hand, the euro stands to benefit from a peace dividend if US-led negotiations gain traction.

The increasingly strained relationship between Washington and Brussels is also emerging as a potential flashpoint. In addition to stepping up his criticism of ‘weak’ EU leaders, Trump has renewed his claims that the US ‘needs’ Greenland for security reasons. While markets have previously dismissed such rhetoric as political theatre, the President’s territorial ambitions are now being given greater weight following the intervention in Venezuela.

Finally, on a macroeconomic level, the Eurozone’s uneven economic trajectory will be a key focus for EUR investors. Germany’s manufacturing base continues to struggle amid weak international demand, while France struggles to introduce much-needed fiscal reforms amid a fractured political landscape.

Impact on real estate investment

If the euro continues to appreciate, it could reduce demand for popular markets such as France, Spain, and Portugal, particularly as visa requirements become increasingly expensive. However, whether a softening of EUR could boost demand for markets in the Eurozone may depend on the cause of the euro’s decline. A weaker euro resulting from a less stable Europe is unlikely to encourage foreign investment.

GBP: An uphill battle

The pound’s performance in 2025 was decidedly mixed, with bouts of gilt-market volatility, persistent uncertainty over fiscal and monetary policy, and a sluggish domestic economy all feeding into elevated FX volatility.

A central risk for Sterling in 2026 is the Bank of England’s (BoE) policy direction. While the BoE has signalled that decisions on further easing will become ‘a closer call’, investors still lean towards two additional rate cuts in 2026 as inflation cools and growth remains soft.

UK politics look set to infuse fresh volatility in the pound this year. May’s local elections are shaping up to be a major stress test for Prime Minister Keir Starmer’s authority. A poor performance by Labour could embolden internal critics to attempt to unseat Starmer. Even if he survives, the resulting political uncertainty could prove toxic for Sterling, particularly if it spills over into the bond market.

Further out, the outlook is more balanced - and could prove more supportive. If the BoE’s easing cycle ends around mid-2026, sterling may find firmer footing, especially if UK rates remain higher than those in the US and Eurozone. Lower borrowing costs could also support economic activity, while closer UK-EU alignment may improve growth prospects and would provide a compelling reason for a stronger pound.

Ultimately, this push-and-pull could lead the pound to muddle through 2026, as long as global conditions remain benign.

Impact on real estate investment

A stronger or stable pound this year would mean London and other UK property markets won’t be the steep bargain for foreign buyers that they were when Sterling slumped in prior years. This could also lift housing demand from domestic buyers, as a stronger pound should help temper imported inflation. Conversely, if Sterling were to weaken, history suggests opportunistic foreign investors may swoop in to snap up high-end properties at a relative discount.

Emerging market currencies: Maintaining momentum

Many emerging-market currencies exhibited surprising resilience last year. The Chinese yuan, Mexican peso, Brazilian real and South African rand all strengthened in the second half of the year, supported by relatively high local interest rates, improving commodity prices, and a weaker US dollar.

Heading into 2026, those tailwinds look set to persist. With growth in several major economies slowing and rate cycles turning, global investors are likely to continue seeking higher yields, underpinning EM carry trades.

That said, the ‘emerging market’ covers a broad basket of currencies, and not all will thrive equally. Domestic political risk is a key differentiator - elections in countries such as Brazil are a recurring catalyst for FX volatility - while fluctuating energy costs remain a material threat for import-dependent countries. More broadly, EM FX would likely underperform if geopolitical tensions intensify or if an AI-driven equity correction triggers a global flight to safety, pulling capital back towards the US dollar and other haven assets.

Impact on real estate investment

In many emerging markets, local credit is limited, and developers often rely on dollar-denominated loans, leaving projects exposed to currency moves. If EM currencies appreciate against the dollar, the local-currency cost of servicing USD debt tends to fall, potentially improving project viability, accelerating construction timelines, and lowering overall development costs.

Over time, stronger delivery pipelines could increase housing stock, thereby moderating price growth. In some cases, continuing to attract international buyers even in the face of unfavourable FX movement.

2026: More volatility ahead

A softer dollar, a politically sensitive euro, a finely balanced pound, and selectively resilient emerging-market currencies all suggest that purchasing power, financing costs, and cross-border appetite will remain fluid through 2026.

While the outlook for the currency market in 2026 is uncertain, one thing we can be confident in is that FX exposure will continue to shape the property market, determining where capital flows, how projects are financed, and which markets appear attractive at any given moment.

Recognising these currency trends and understanding when FX is supporting demand rather than quietly eroding returns can help you better understand the mindset of any international clients considering a cross-border property purchase in 2026.

Learn more about what’s happening in the FX market and how to protect you and your clients from potential volatility by speaking to an expert from Redpin today.