Since early May, the pound to euro interbank exchange rate has fallen from a peak of 1.1757, to 1.1151 at the time of writing. That’s a decline of over 6 cents, or 5.15 percent.
The biggest factor contributing to sterling’s decline is that financial markets don’t know what relationship the UK will have with the European Union (EU) after Brexit. This is more than three years after the UK voted to leave the EU. Also, the pound is being weighed down by the fact that both candidates to become Prime Minister, Boris Johnson and Jeremy Hunt, have said that they’d accept a ‘No Deal’ Brexit.
So, what can you do to minimise Brexit risk, when you transfer your money to your Spanish bank account to move to Spain? Well, you’ll find five easy tips below.
1. Stay up-to-date with the exchange rate
This helps you to avoid Brexit risk, because when you know what’s happening to sterling’s value against the euro, you can better plan your money transfer to Spain. By comparison, if you don’t watch the exchange rate before you buy your euros, then you’re in the dark.
To keep track of sterling’s value against the euro, you can check the live interbank exchange rates on the Foreign Currency Direct website. Alternatively, you can search ‘live exchange rates’ on Google to find the latest interbank rates. This will help you to plan your euro purchase, even with Brexit.
2. Check what’s affecting the pound versus the euro
The second tip to avoid Brexit risk for when you transfer money to Spain is to keep an eye on what’s affecting the pound to euro exchange rate. After all if you know that, for example, Boris Johnson has committed to take the UK out of the EU without a deal, and that this might weaken the pound, this can help you to decide when to transfer your money to the UK.
Also, it’s worth noting that Brexit isn’t the only factor affecting the exchange rate. There are dozens of factors, including the UK’s and Eurozone’s economic performance, and the Bank of England’s and European Central Bank’s interest rate outlook. By staying in-the-know, you’ll develop a better idea of what’s influencing the exchange rate, to help you decide when to buy your euros.
3. Set up a rate alert, for when your target exchange rate hits
This way, when your target exchange rate hits, you’ll receive an email or a phone call telling you. This way, you can take advantage of any unexpected movements in the exchange rate, to buy your euros at the level you want. This is a helpful tool to ensure you get the euro total you’re after, even with Brexit.
4. Consider setting up a forward contract
With a forward contract, you fix your exchange rate at today’s level, so that even if the pound fluctuates in future versus the euro, you get the exchange rate that you’ve locked in. This protects you from adverse movements in the value of sterling and guarantees the euro total that you’ve receive.
To set up a forward contract, you put down approximately 10 percent of the amount that you intend to transfer. Then you can transfer your money at any time you like in the following 12 months.
5. Seek guidance from your money transfer service
They’ll be able to tell you what’s affecting the exchange rate, what’s happened to the value of the pound versus the euro recently, and offer you their guidance based on their years of experience helping people to transfer money. So you can ensure your money transfer goes well, in spite of Brexit uncertainty.
By Peter Lavelle at foreign exchange broker Pure FX, a trading name of Foreign Currency Direct Plc
Please note that the exchange rates within this article are interbank rates and are for indicative purposes only, and are not trading levels which Pure FX offer. For live trading levels contact one of the Pure FX currency brokers on +44 (0) 1494 671800.
This article does not constitute advice to any person on any matter and it is not intended as a recommendation to trade. Pure FX makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to any loss arising from actions taken as a result of acting on this information.