Downing Street have said today that Theresa May will begin the process of leaving the EU next Wednesday the 29th March. Negotiations will then begin, which is likely to herald a period of extreme uncertainty that could send the Pound crashing.
As soon as the news was announced the Pound fell by around half a cent against the Euro. I think that next week when it’s official, the Pound is at risk of falling further.
Markets hate uncertainty and it’s this uncertainty that has pushed the Pound lower since the vote last June. As soon as negotiations begin there will be many issues that start to materialise, but the fact is that until we get a clear picture of what a post EU UK is going to look like, Sterling is likely to remain under pressure.
Protection against the Pound dropping
With only a little over a week to go until negotiations start, now is the time to consider what protection you need if you need to convert Pounds to another currency in the next 12 months. Simply waiting could mean that you end up with a much lower exchange rate should the Pound plummet.
One option is to fix your exchange rate now with a ‘Forward Contract’. This is a type of contract that allows you to guarantee the current rate of exchange for a period of up to 2 years. You only have to lodge 10% of the total to be converted, with the remaining 90% due when you want your currency to be transferred. This is especially useful for those buying property overseas, or a business that needs to pay invoices in a foreign currency. It protects you against the rate dropping while allowing you to budget effectively knowing exactly what your currency will cost.
Need to exchange currency? Get in touch today.
If you need to exchange currency and would like to discuss Forward contracts, or simply get a quote for your exchange to compare with your bank or existing broker, contact us today.