Currency exchange forecast for March
In January the
Pound was a star. In February it was a dog. What will it be in March? Dog?
Star? Nobody can know for certain, but this won't prevent every analyst from
volunteering his own opinion on currency exchange. It will probably be a new
one because analysts have been changing their opinions of Sterling with
their socks this year.
Bank of England's Monetary Policy Committee
Even the Bank of England's Monetary Policy
Committee has been blowing hot and cold. In January, with little or no
warning, it banged a quarter of a percentage point on interest rates. In
February MPC members lined up to tell us that inflation would fall back
towards its 2% target with little or no help from further base rate
increases. In a dynamic economy it's no surprise that the signals change
from time to time. We simply have to update our opinions as the economic
indicators swing between speed-up and slow-down. |
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All information is treated in strict
confidence (although it will be passed a specialist currency exchange
professional in order to provide you with details
of the best products and rates available). By submitting the form to us you are deemed to have
authorised any such disclosure. |
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Currency affected by interest rates
Investors take a particularly keen interest in interest (pun intended). Rising interest rates are attractive because they point to better yields in the future and tend to make a currency appreciate as more buyers step in. By the same token, steady or falling interest rates will act as a disincentive and investors will move on to another currency with more promise. This is why the Pound has been up and down since the beginning of the year. The prospect of higher rates in January had investors rushing to buy, the evaporation of that prospect in February sent them rushing elsewhere to exchange currency.
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French property buyers have a tough decision to make
Such a situation makes life tough for Britons intending to invest in French property but knowing little about currency exchange. Should they buy now and risk missing the opportunity to buy more cheaply at a later date? Or should they delay their purchase, hoping for Sterling to appreciate, only to find the Pound weaker in the months ahead?
Click here for advice on Currency
Exchange - Buying Euros at the Best Rates - Your FAQs
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Currency exchange uncertain at the best of times
Given the certainty of foreign currency exchange rate uncertainty (for it is uncertain) the cautious approach is to do neither of those things but to hedge the bet. Buy half at today's rate and buy the other half later. If the Pound goes down then at least fifty percent of the Euros will be on board at a decent exchange rate. If Sterling strengthens, happy days; the other half can be bought at an even better exchange rate.
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Forward transactions
The other trick with currency exchange, and it is one that the high street banks will not mention unless you represent a big corporate client, is to buy the Euros “forward”. With a forward transaction you can fix an exchange rate now for settlement in a few months' time. Better still, the only payment that needs to be made up front is a percentage deposit so you don't need to raid the piggy bank, yet.
Click here for further advice on Forward Transactions or Contracts
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Currency exchange companies
Currency specialist firms are the place to go to arrange a forward trade, or any large currency exchange; a side benefit from dealing with them is that you will be talking to an account manager in London rather than to a clerk in a Timbuktu call centre. (
Advantages of using a currency broker or foreign exchange specialist).
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Currency predictions always uncertain
If Sterling were to continue to fall at February's speed it would be down to €1.41 by the beginning of July. This will not happen. Neither will the Pound rise at two Euro cents per month. It will probably stay within the last six months' trading range between €1.46 and €1.53. In some ways this is reassuring but it's the "probably" that gets you every time with currency exchange. "Probably" is not "certainly" and only a brave or a rash investor would deny the possibility of it moving outside that range.
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Advice for French property seekers
So, optimist or pessimist, those buying French property who are wanting to benefit from currency exchange, should hedge their bets and protect the value of half of their intended investments. Never mind about buying their Euros at the next Sterling high, just avoid buying them at the next low.
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About the author
The information in this article has been supplied by the currency broker Moneycorp. For further advice on currency exchange and money markets, please contact Moneycorp directly using the links below.
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