Thursday 8th October 2015
The currency markets have been calmer this week, with not as much fluctuation a we have seen in recent weeks. In the chart below, you can see that the Pound/Euro rate in particular has remained range-bound between 1.3550 and 1.3650 in recent days:
The reason rates are relatively stable is that economic figures have been roughly as expected. UK GDP is around 0.5% which is about what the markets thought. German Exports were down but it didn’t really weaken the Euro much. The Bank of England (BoE) have kept interest rates on hold as expected, and the speeches by the central bank governors didn’t really give any surprises. It’s still the case that the BoE will likely raise rates halfway through 2016 and I don’t expect much Sterling strength until then.
How to buy currency at the best exchange rates
Given the relative calm in the markets, I thought today would be a good opportunity to outline the various contracts that I can offer to help you get the best exchange rates and protect you against adverse movements in currency prices. I can source you rates up to 5% better than banks and other brokers may offer, so if you have a currency transaction and would like a quote to compare, then get in touch for free here.
Here are the main contracts I can offer for currency exchange:
Spot Contract (Buy your today) – This is the most popular way to buy currency. You fix a rate over the telephone, settle within 2 days, and your currency is transferred by priority transfer to the account of your choice. The rate varies throughout the day as we buy live from the market, and can be up to 5% better than your bank or existing broker may offer.
Forward Contract (Fix into the Future) –You can fix today’s rate of exchange for up to 2 years, protecting you against volatility and helping you to budget. You lodge 10% of the total to be converted within 2 days, with the remaining balance due when you want your currency transferred. This type of contract really helps budgeting for business’s and those buying or selling property abroad.
Limit order (Hold out for a better rate) – Secure your currency when your desired rate becomes available; particularly useful if time is on your side and you think the rate may get better. This allows you to aim for a higher rate in the hope that things will get better.
Stop loss order (Protect against rates dropping) – Your currency is exchanged if the rate goes below a pre-determined level. Combined with a limit order, you can hold out for a better rate while protecting yourself from a sudden fall in the market. This gives you a worst case scenario so you don’t end up paying more than necessary for your currency.
So that's a brief overview of the main contracts I offer. I also provide a free consultative service for any clients who need the best exchange rates in order to explain what may move the rate, to help you decide when to fix a rate and what contract type to use. Using these types of contract give you control over your currency purchase. The alternative is simply sitting back and hoping the exchange rate will move in your favour. In my experience, hope is not a reliable economic tool.
To discuss our contract types in more detail and take the first step to taking control of your currency needs, contact me today by sending me a free enquiry by clicking below, and I will get in touch personally to discuss your requirements.