Tuesday, 16 September 2014

Protect your currency requirement against Scottish Referendum

Tuesday 16th September 2014 
Good afternoon. Significant volatility remains in the currency markets, with the Pound/Euro rate continuing to fluctuate in value due to uncertainty over the Scottish referendum. 

Pound/Euro over the last week 


As the chart below shows, the last week has been very choppy for Sterling Euro. We have seen a low of €1.24, a high of €1.26, and in just the last 24 hours it’s moved up and down by nearly a cent. 


These movements are being driven by investor sentiment as the Pound is bought and sold on speculation on what may happen with this week’s Scottish referendum vote. 

What would happen to the Pound if the vote is Yes? 


It is of course impossible to predict which way exchange rate moves, if it were possible I would not be writing these market updates from the trading floor, I would be relaxing on my super yacht in the Mediterranean! What we can do is take a view on what may happen with exchange rates, and explain the tools available to protect against the rate moving the wrong way. This is a much better strategy than simply hoping the rate won't fall. 

My view is that should Scotland vote Yes, then the uncertainty this would create in the financial markets means that Sterling would face a huge sell-off. As investors dump the Pound many more would join the bandwagon and we could see exchange rates fall by up to 5%. 

What would happen to the Pound if the vote is No? 


This is harder to predict. Some think that the Pound is being held back by the possibility of independence, and that if the vote is No Sterling will rebound. I’m not so sure. In the event of a no vote there will still be much uncertainty surrounding the future economic realities of further devolution, and the currency markets hate uncertainty. So I think at best we might see a temporary spike in the Pound, but if so it will be short lived. 

What you should do to protect your exchange rate 


You can get in touch with me here for a free consultation on your options. I can explain the different paths you can take so you can take an informed decision on when to fix a rate. For example those buying Euros may wish to use a Forward contract to lock the rate in advance of the result, protecting against the market dropping. 

Those converting Euros to Sterling could look to place a ‘Stop Loss’ order to hedge against the rate moving the wrong way, while still being able to take advantage of any Sterling weakness. 

Whatever your currency requirement, I can help you with various contract types, over 10 years’ experience in the Foreign Exchange markets, and rates of exchange that are incredibly competitive, and up to 5% better than banks can offer. 

Click here to send me a free enquiry now.