The pound fell dramatically in value following the vote for Brexit in June 2016 and continues to remain under pressure with less than 6 months to go before Britain officially leaves the EU.
The overall view seems to be that the pound will recover after Brexit , there is no better time for foreign investors to consider the UK, our currency transfer partners offer exceptional rates and can forward book trades at exclusive preferential rates
The UK is scheduled to depart the EU on March 29, 2019. There will be a transition period after this date lasting until the end of December 2020 when the pound is expected to rally, during which the finer details of Britain’s future relationship with the EU will be ironed out.
Here, we look at the prospects for the pound as we approach Brexit, along with steps those making currency transfers can take to help protect themselves from potential negative exchange rate movements.
Outlook for sterling
Although sterling started 2018 as one of the top performing currencies, weak first-quarter economic growth figures prompted it to fall to a five-month low at the end of May. Sterling was trading at $1.335 against the dollar, its lowest level since December 2017.
According to latest data from the Office for National Statistics (ONS) UK gross domestic product (GDP) grew by just 0.1% in the first three months of 2018, down from 0.4% in the last three months of 2017, with Brexit considered an underlying contributor to the slowdown.
What impacts currency movements?
No-one can predict with any certainty what will happen to sterling as we approach Brexit, and it’s important to remember that there are several different factors as well as our departure from the EU which affect its value.
These include inflation or the costs of living, which fell to 2.4% in April, as measured by the Consumer Prices Index measure of inflation. Falling inflation eases pressure on the Bank of England to raise interest rates. When interest rates are low, this often has the effect of deterring foreign investors as their money will earn less interest, reducing the pound’s relative value.
Although sterling is currently weak, the more clarity there is over Brexit, the more likely some commentators believe it is that we will see the pound rise in value in coming months. However, many potential hurdles in Brexit negotiations lie ahead, and it’s impossible to predict exactly how sterling will react. It therefore makes sense for anyone considering making foreign currency transfers in the run up to, and after, Brexit to ensure they are prepared for sterling volatility.
Protect yourself from negative exchange rate movements
If you’re planning to make currency transfers over the next few months, make sure you seek out the best possible exchange rates and explore ways to protect yourself from the risk of exchange rates moving against you.
High street banks rarely offer the best exchange rates, so compare rates from foreign exchange specialists as these can beat banks by up to 4%. That could potentially save you thousands of pounds if, for example, you’re buying property overseas and transferring a significant sum overseas.
Foreign currency specialists also usually have access to a range of tools which can protect you from negative currency rate fluctuations. For example, with a forward contract you can lock into a favorable exchange rate at which you buy or sell currency for up to two years.
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