The central Bank of France anticipates that the country’s economy will see growth of 0.8% during the second quarter, doubling the rate from the first part of 2011. French consumer spending also increased, as did hiring. Bloomberg also reports that the number of jobless surveys completed reduced.

The pound has slipped slightly against the dollar, following a revised forecast of economic growth, which put the country slightly below where it had been previously anticipated. At the same time, the UK’s inflation expectation has been lowered, thus alleviating pressure to increase the interest rate. However, the pound rose marginally on the euro.
As the debt crisis in Spain is continuing to be resolved with sovereign debt being auctioned, so that the debt problems will be restricted, it is likely that the euro will continue to strengthen in the coming months. The euro has climbed by 7% against the dollar this year alone.
This has impacted many potential French real estate buyers’ budget and thus increased demand for higher French mortgages to minimise exchange rate loss.

Rising inflation rates across Europe, and notably in France, with a 2.3% increase in February alone, are encouraging the European Central Bank (ECB) to increase the interest rates in order to counter these unanticipated levels of inflation. The bank shifted its year-long and its 2012 overall inflation projections.

The interest rate increases are aimed to signal to investors that there is a focus on controlling inflation throughout the Eurozone. The ECB is tightening economic policy as the economy rebuilds and expands. The ECB Governing Council members expressed that monetary policy as it stands is too “accommodative”, thus necessitating the higher interest rates. Further, the rising interest rates are an indication that the economy is strengthening to be able to withstand the shifts in investment that may occur as a result of the changes. Additionally, the increased interest rates are an emphasis on the bank’s credibility.

The problem of balancing stronger economies, like Germany and France, which recovered the most quickly from the financial crisis, with the countries that have required aid in the form of foreign loans or World Bank bailouts remains a challenge for the ECB.

The IMF last week increased its growth prediction for the euro region to 1.6% in 2011 and 1.8% in 2012. The ECB is also trying to emphasize that while the euro’s exchange rate dipped slightly in mid-April with announcements over Greece’s bond rankings they are confident that the sovereign debt crisis, in terms of those countries requiring bailouts, is a restricted situation.

The primary policy goal of the ECB this year is inflation control. The ECB has not explicitly indicated whether its Euribor rate will indeed increase to 1.75%, a further increase of 0.5%, but there are indications that such increases are not out of the question. There is an expected raise in the interest rate by 0.25% each quarter through the end of 2012 so that the interest rate at that juncture would be 2.75%.

According to Business Week, investors in the European market can expect that the bank will be beginning to decrease its supply of liquidity to banks and to perhaps cut down on its bond purchase program as these two policies are not in line with the policies towards lessening dependency on the ECB by member countries.

A recent survey by the UK Post Office's International Payments division indicates that France is the preferred destination for expatriate relocation, ranking above Spain, the United States, and Australia. In a time of increasing inflation; unemployment and a precarious mortgage market, the stable and indeed strong French property market and French mortgage market seems to continue to draw expats.

The European Central Bank reaction to inflation by increasing interest rates pushed the Euro/USD exchange rate above 1.40 in mid-March. According to RBS, at the end of the second quarter of 2011 the EUR-USD exchange rate will be at 1.38; the Pound to Euro exchange rate is expected to be at 1.18.