Friday, 30 September 2016

When to exchange Pounds into Euros?

This is a question we're asked all the time, as of course everyone wants to know if the Pound will go back up against the Euro. It's gone up a little bit today, after the Pound received a little boost after slightly better than expected data showing the UK deficit isn't as high as expected. The figure was expected to show -£30.5bn but was only -£28.6bn. I expect the gains to be limited however as the UK still has one of the largest deficits in the developed world. GDP was also 0.1% higher than expected, and while positive, is nothing to really shout about.

Regular readers will know that due to week end / month end flows and profit taking, it's likely that the Pound will start to tail off this afternoon as has been the recent trend. Many clients are fixing rates of exchange now due to the concerns that Sterling will fall further in the coming months. 

When should you exchange Pounds to Euros? 


While impossible to predict and forecast what will happen with the rate, you can analyse recent trends and make an informed decision on when to lock in to a rate of exchange.

For example, since the referendum, we've seen the GBP/EUR rate drop to €1.15 several times, but each and every time it has recovered again. This time that doesn't seem to be the case. The Pound has been under pressure all week, and the only reason it's climbed to €1.16 is due to a weaker Euro and the better data this morning. I think we'll be back down to €1.15 by the end of the day.

Protecting against adverse exchange rate movements


With investors now fearful of the uncertainty the referendum is causing, I think we'll see the Pound fall further in the coming weeks. If you need to convert Sterling to another currency, one thing you can consider is a Forward contract. We can use this to lock in the current rate for up to 2 years, and you then know exactly what your currency is costing you and are protected against the rate dropping further. You lodge 10% of what you want to convert as a deposit.

Those less risk-averse may wish to gamble on the Pound regaining some strength. That would be a brave gamble in my opinion, and to cover yourself in this kind of scenario, you can use a 'Stop Loss' order. This allows you to hold out for a better rate, but have a level at which your trade is executed if rates do fall further. This way you have a worst case scenario and aren't risking paying thousands more than necessary for your currency. This is very useful when budgeting to purchase property abroad.

These types of contract are just some of the solutions that we can offer, in addition to the extremely competitive rates of exchange that we offer. Want to find out more about how we can help you get the best exchange rates? Click here or complete the form below to send us a free enquiry today to get a no obligation quote on your exchange.