What affects exchange rates? How do you get the best deal?

Why do exchange rates matter?

People from all walks of life are reliant on currency, from Private individual’s buying a property overseas, to companies paying invoices in a foreign currency. Market fluctuations can therefore have a huge impact on the cost. When deciding the best time to exchange currency, it’s important to understand what can affect the rate.

What data and information can impact exchange rates?

Every day, we see a constant flow of economic data. This has a significant impact on exchange rates, both positively and negatively. This can also affect how central banks view monetary policy and interest rates. Interest rate volatility is one of the main catalysts for an exchange rate movement. (Generally if an interest rate rises, or there is speculation for an imminent rate rise, then there is an increase of demand for that currency and the value increases. The same is seen if the situation is reversed.)

It’s not just economics however, as many other factors can impact exchange rates. For example, a country’s political status has a significant impact on the value of their respective currency. During times of political instability, e.g. during an election or referendum, you will often see significant volatility for the currency of the country involved. A case in point is the recent value of Sterling that has largely been driven by the result of the EU referendum.

How do you get the best exchange rate?

The first port of call for many clients that need to exchange currency is to approach their bank. Clients will often lose out by doing this, as bank rates are usually quite poor. By using the service of a specialist currency broker, you can often save in excess of 2 to 3%. When converting a large sum, this can save you