What does the increase in the €/£ exchange rate mean to you?

What does the increase in the €/£ exchange rate mean to you?

The last few months have been good for sterling relative to the euro. At one stage we even exceeded a rate of €1.21/£1 - the last time we saw this was in late 2008.

But have you sat down and worked out what this could mean to you? And do you know how to take advantage of this rate and minimise your “downside risk”? The benefits don’t just apply to the larger payments - regular and/or smaller one-off payments can benefit too.

If you started looking for a property in the Euro zone in 2009 you would more than likely have been budgeting at an exchange rate of between €1.05 to €1.10/£1. This means that every €100,000 you were expecting to spend will now cost you £10,000 less than you first thought!
A saving like that could pay for your white goods, a new car or perhaps an even bigger property.

And for those of you who originally budgeted for a rate above €1.20/£1, you may well find that the drop in house prices means that the cost in sterling terms is very similar to what you at first had budgeted. Maybe it’s a case of dusting off those cobwebs and revisiting your dreams!

And, as mentioned, this doesn’t just apply to larger payments. Regular transfers of pensions could suddenly net you 10% more or mortgages could cost you 10% less. And such amounts can make a huge difference to the way you are able to live.

The question is, of course, will the exchange rate stay at these exalted levels? Who knows? Market analysts say yes, given the problems in the Euro zone, but we also have to remember the problems we have here in the UK and the huge government budget deficit. Things could change very quickly…

How do you guard against this and minimise the chance of getting less for your sterling as the rate returns to €1.10/£1?

In an ideal world, if I was committed to buying a property, I would want to buy my euro’s sooner rather than later, so that I could secure the reduced sterling cost. However, I wouldn’t want to pay it for it all now. That sounds a trifle unrealistic, but it can be done, using something called a forward contract.

You simply agree the amount of euro you are buying and the exchange rate you are happy with. This in turn means you will have established the sterling cost and the time by which you will pay for the funds in full. A deposit of up to 10% will secure the funds being bought on your behalf.

The same principle can be applied to regular payments, where you can fix an exchange rate for the next twelve months and draw on it monthly.

Give us a ring and talk though the different options. This will remove the downside risk by buying some, if not all, of your euro’s ‘forward’.


Jargon Buster – Downside Risk
"Downside risk" - the possibility that exchange rates will move in such a way that you suffer an additional cost and there is nothing worse than suddenly having to find an extra amount of sterling or receiving less than you had originally expected. Also it seems to happen when all indicators seem to point to the opposite happening! That is why buying/selling forward is excellent for minimising downside risk


UK Banking Systems – the simple made so difficult
Just thought it worthwhile to share an article from this weekends press on the UK banking system. Never ceases to amaze me how the simple is made so difficult. You would think that the "faster payments" system would be fairly universal in how the UK banks implemented it. Clearly not.

But having said that it makes it so much easier for people to understand why we exist as a company bringing simplicity to international transfers plus the ability to talk to someone who can help rather than having to spend half a day trying to find someone who may be able to help.

http://news.bbc.co.uk/go/em/fr/-/1/hi/business/10297758.stm


For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com

An Option the Banks Won't Tell you About....

by Smart Currency’s Charles Purdy.

It is often thought that the only way to buy currency is by paying for it in full.

Most buyers that don't know about currency options buy the currency as and when it is required - they wait until the last minute. This is what the banks love their clients to do as the client is 'forced' to buy at the rate the bank offers.

Some buyers buy the €’s immediately when they know the amount even if they don't need to use them for 3 months. Buyers do this to avoid the cost of the euros increasing so they know their exact costs.

However there is a more efficient alternative that the banks fail to tell you about.

The alternative is to secure your currency requirements (without paying the full amount for them) using what is known as a forward contract.

Pretend that you require €100,000 in three months time and you don't want to risk the sterling cost increasing by £5-10,000. (An increase can easily happen due to changes in the exchange rate between now and 3 months time)

You can agree an exchange rate for those €’s now. All that would be required is a deposit of up to 10% of the sterling purchase cost.

This means that you don't need to pay the full amount for the euros now, so you can keep 90% of your funds in a sterling high interest account. By doing this you will know EXACTLY how much you will require when it comes to pay for the €’s in three months time. (You'll know that you won't need to pay an extra £5-10,000 )

It may sound complicated but is very simple to do when you work with a company like Smart Currency Exchange. And the joy of such an approach is that it removes all the uncertainty and the associated stress and strain as you know exactly what your cost will be.

For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com

So Happy in Cyprus!

Hilary and Lyn Whitehead were looking for a sunny, relaxing holiday retreat away from the gloom and doom of the UK. Life had not been altogether easy recently: “I nursed a sick relation through very serious health problems” confided Hilary, “and I must say I really was looking forward to a time when we could relax in the sun - and where better to do that but in Cyprus?”

Added to that was the incentive of a rental investment. With property sales slipping worldwide, they realised that rental properties are much in demand and they decided this could be a good way to supplement their pensions.

“We had spent many happy family holidays on the island” recalls Lyn, “so it seemed the obvious choice for us to start looking for our place in the sun there.”

“We had visited the island over a dozen times over the years, and loved it. Hilary agreed. “We wanted to buy perhaps in the Tala or Pissouri areas – that was our original idea. We were all booked and set to travel to Cyprus in September 2008 – and guess what? We had booked our return trip with XL Airways, flying out of Gatwick on the 15th; on 12th September the company went into administration!” Undeterred, the Whiteheads rescheduled and flew off to Cyprus early in November, determined to enjoy their new property by the spring of 2009.

After quite a bit of research on the Internet, help for the Whiteheads came in the form of a company that offered impartial advice, backed up by references from people who had actually been through the buying process in Cyprus themselves. “We did our homework very thoroughly and found what turned out to be a most amazing estate agent. We had read the Cyprus Buying Guide website and contacted them for help. They were able to make informed recommendations based on both information gleaned from readers and from personal experience.

“The estate agent helped us reschedule our trip and took us to numerous properties in Cyprus” adds Hilary. “Their service was absolutely EXCELLENT. And not only that: our concern was the fact that the exchange rate had turned against us. We were on a very tight budget...135,000 GBP. We also anticipated a lot of add on’s.....Smart Currency Exchange, the currency company the Guide recommended, talked us through the idea of buying our currency in advance, what they called ‘forward buying’ - which made a lot of sense and set our mind at rest about spiralling costs.”

By early January the Whiteheads were well underway to being the proud owners of a lovely property in Cyprus. Spring in their new home has become a reality, and all that remains is to move in and enjoy the fruits of their labour!

For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com

How Smart Differs…

A couple of days ago I was asked a very simple question by someone who was thinking of buying property abroad: “How do currency companies differ?”

He went on to add: “They all seem the same…they seem to offer the same benefits when I speak to them about transferring money abroad. How do I know which one to choose?”

Actually, the people at Smart Currency Exchange are often asked this…and their reply is that there are enormous differences between Smart Currency Exchange and any other exchange company, differences that could make a world of difference to you.

Firstly, Smart Currency Exchange is the only currency company in the UK that does not pay their traders commission – they get a regular salary. That fact alone will allow you peace of mind that you’re not in the hands of someone who is trying to make the most money they possibly can out of you.

Secondly, they do not spend thousands of pounds on marketing. Generally, the word is spread via the Internet and by word of mouth, from one contented client to their friends and relations. This means that Smart is able to save vast sums on advertising and this is reflected in the exchange rates they are able to pass on to you, the client.

Thirdly, Smart is totally dedicated to personal service, a rare thing in this day and age. I don’t know about you, but if there is one thing that absolutely MADDENS me it is when I phone somewhere – be it my bank, water or currency exchange company – and I spend the next half an hour pressing buttons and listening to ridiculous messages like ‘Your call is important to us’ – quite clearly it isn’t, otherwise they would actually be talking to me!!

When you phone Smart Currency Exchange, you will actually speak to REAL PEOPLE - people who can explain the whys and wherefores of transferring currency abroad and all about currency exchange rates. So please, don’t hesitate to pick up that phone and ask questions about this – Smart’s currency experts will have heard them all before and will be delighted to help you. You will immediately speak to someone who can clearly and concisely explain the whole process to you.

For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com

The Election and how it has affected the Currency Market

The UK has just had one of the most hotly contested elections in living memory which, as expected, resulted in a hung Parliament [no one party having a clear majority]. Whilst we saw the pound gain initially as the new Conservative – Liberal Democrat coalition was announced, it has fallen even further and has hit a 13 month low against the US dollar as the reality of the situation facing the UK has hit home. With the election now firmly out of the way, what will drive the value of the pound over the next few months?

Sterling has come under attack in the last few months over political uncertainty related to the perceived ‘weakness’ that a hung parliament would bring. Why has this been a problem? The UK needs to match income to expenditure that means tax hikes and spending cuts in order to start paying down the biggest deficit since WW II. Neither the Conservatives nor the Liberal Democrats made it clear in their manifestos exactly how they would tackle the huge deficit. Sterling has weakened since the election as the government has promised £6bn of cuts in the next year and many are concerned – especially with poor housing figures released this week – that aggressive cuts will stifle out the fragile growth that we have seen so far since the credit crunch. Looking at the UK relative to the USA, where interest rates are expected to rise at some point later this year, the USA becomes a far more attractive investment than the potentially stagnant economy of the UK. Whilst the markets have embraced the new government’s stance on aggressively cutting the deficit, they are tentative over its implication.

The new chancellor George Osborne releases his first budget on June 22nd, in which he will outline where the cuts are to come from in order to attack the record deficit. For the pound to strengthen there needs to be a clear plan of action that the financial markets thinks is realistic and addresses the core problems and which the “ruling” parties can agree in order for any legislation to get passed. This may seem like too much to ask. Firstly, there are potentially deep ideological differences between the parties on how policy should be implemented and it is likely that the markets will be sceptical of any budget clearing plan – especially given the scale of cuts and savings required.

As it stands, the outlook for the pound is poor against the US, Australian and New Zealand dollar or South African rand as these economies seem likely to retain the relative upper hand over our own. There may be one light at the end of the tunnel for sterling – the Euro zone. With the Euro zone in the midst of a debt crisis, the pound could take advantage and strengthen. Could we see sterling hit €1.20/ £1 in the coming months? We will have to wait and see. The best thing to do is call in sooner rather than later and speak to a currency specialist to ensure that you avoid missing out on favourable rates and ensure that you don’t lose money by buying at a poor time.
Please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK)


Jargon Buster - Hung Parliament

This is where no one political party has a clear majority following an election. You usually find that the political party with the most seats takes the lead but they need to rely on other parties to support them. The support could be either in the form of a lose political agreement or based on a detailed agreement similar to the one we see between the Conservative and Liberal parties here in the UK.


For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com