Sterling has stabilised a little today at around the €1.2650 mark vs the Euro, after 3 days of continual falls (click here to see the latest live currency graphs). UK GDP figures came in this morning at 0.5% which was as expected. This has supported the Pound a little, however I don’t think the rate will stay at this level for long. Yesterday, the UK’s largest bank HSBC joined other major banks in warning that the Pound could collapse by 15% to 20% should the UK vote to leave the EU. Goldman Sachs voiced similar warnings last week. Despite the fact that these warnings may of course be self-serving, they should be heeded by anyone that needs to convert currency in the next 6 months.
The next few months are going to be very uncertain and we’re likely to see extreme volatility in exchange rates. Many of my existing personal and business clients have been in touch over the last few days and are making plans now, for all their currency requirements for this year. Business’s that trade globally are putting plans in place to protect against exchange rates falling, and you can do the same as a private individual. I can help private and business clients get the best exchange rates, and I also provide various ways of protecting against falling exchange rates.
It would not be wise to simply sit back and hope the exchange rate doesn’t move against you, so in today’s post I’ve outlined some ways you can protect yourself against adverse exchange rates. The examples and scenarios below are based on Euros which is the currency we trade most often, but bear in mind that we trade all major international currency pairs. If you have an upcoming exchange and want to get a quote, or find out more about how I could help you, send me an enquiry.
Converting Pounds to Euros
The current rate is in sharp decline, and many forecasts are suggesting this will continue. One option that is very popular for clients that need to buy Euros, or indeed any major currency, is a Forward Contract. This allows you to lock in today’s exchange rate for up to 2 years, but you only need to lodge 10% of what you want to convert.
This guarantees the rate, allows you to budget, and protects you should the rate continue to fall. This is an extremely popular option for clients that are buying property overseas this year, and also for business’s that buy goods from the Eurozone. Buying Euros? Click here for a quote.
Converting Euros back into Pounds
Those in the position of needing to convert a foreign currency back into Pounds should be very pleased indeed. The rate has improved by more than 10% already this year, which means you get significantly more Sterling (€100k nets you £9k more than 3 months ago!). While the rate may well continue to move in your favour, this is not a given.
If it looks like the UK are going to vote to remain in the EU, we could quickly see things move back the other way. Also, the EU may well increase their QE programme soon which would weaken the Euro. If you have to convert funds back to Pounds you can either fix a rate now while it’s the best it’s been in some time, or if you want to gamble on the rate continuing to move your way, consider using a ‘Stop Loss’ order.
This works by instructing us to automatically convert your funds at a pre-agreed level, meaning if the rate starts moving in the wrong direction, you know the worst case scenario. This is like having a safety net in the currency market. A Stop Loss is useful as it still allows you to take advantage of further gains in the rate, while ensuring you don’t lose out on the excellent rates that are currently available. Selling Euros? Click here for a quote.
If you need to exchange currency and want to save money by getting the best exchange rate, send me a free enquiry today. I would be happy to speak to any private or business clients that want to ensure they make the most of their currency.