Pound/USD Dollar falls as Dollar strengthens
The currency markets were driven yesterday by developments in the ongoing trade dispute between the US and China. Over the weekend the G20 meeting resulted in a softening of trade tensions. There were meetings held over the weekend and it looks like there won’t be any additional tariffs for the moment. This news increased investors’ appetite for the US Dollar, and it strengthened as a result. This pushed the GBP/USD rate down to around the $1.26 level. The USD was also helped by some decent economic data from across the Pound.
USD strength causes GBP/EUR to rise
The news also helped support the GBP/EUR rate. As I touched on in yesterday’s report, when the USD strengthens the Euro tends to weaken. We saw this throughout trading yesterday, helping push the GBP/EUR rate back up to around €1.12. There are various other data releases from the Eurozone this week which could have a further impact on the Euros value, as outlined in yesterday’s post.
Sterling unlikely to rally in short term
With no progress expected with Brexit for at least a month, we’re unlikely to see any gains for the Pound. Those that have an upcoming transfer to make, to purchase property overseas for example, have some options they can consider which I have outlined below. For a detailed chat with a currency expert, or to get a free quote, contact us today.
Ways to protect against rates moving against you
There are 2 mains tools that we can offer that you to help you make the most of your currency. The first of these is called a ‘Stop Loss’ order. This is where you instruct your broker to buy your currency if the exchange rate drops below a pre-determined trading level e.g. €1.10. This allows you to hold out for a better rate, enabling you to take advantage should the market continue moving in your favour. This contract is perfect for budgeting for a property purchase, as it gives you a worst case scenario.
Those that are more risk averse and do want to take any risks, should consider a ‘Forward Contract’. This allows you to freeze the current rate for up to 2 years, by lodging a small deposit of 10% of the total to be converted. This means you are protected against the rate dropping further, as has been the trend over the last 6 months. A forward contract is perfect if you don’t need to convert your currency immediately, but you want to avoid the risk of sudden fluctuations in exchange rates. However you can’t take advantage of any further gains in the rate should the Pound strengthen further.
If you would like to find out more about Stop Loss Orders, Forward contracts, or just get a free quote, contact us today.