Sterling bumped up to its strongest level against the euro for five weeks over the weekend, having held on to the gains it made in late December. It is currently around 2% stronger than the average of the past year.
However, the notable thing about GBP/EUR has been its lack of volatility in recent weeks. That is likely to change, probably sooner rather than later, so it is worth considering your position if you have an overseas transaction coming up.
The threat to supply lines resulting from missile attacks in the Red Sea and the effect that is already having on global trade as ships are rerouted around Africa has caused business analysts and commentators to remark on a change in global business policy lately.
The buzz phrase is that businesses relying on parts from around the world have had to abandon the ‘just in time’ principle of buying supplies, in favour of having a range of suppliers ‘just in case’. This follows on from the pandemic and war in Ukraine, where supply line disruptions led to the worst inflation in 40 years.
I would suggest taking a similar approach to your currency. Some people buying property overseas, for example, will wait until they are about to complete on a property before really thinking about currency. However, by that time, in today’s world, exchange rates can easily be very different to when they committed to buying the property, with very serious implications for your plans – if you can still afford them – potentially having to find many thousands more pounds to complete.
It is much safer to take a ‘just in case’ approach and lock your exchange rate in, as soon as you are committed to a purchase, at the latest. That way you know exactly what you can afford and can enjoy your winter planning a warmer, happier, rest of 2024.
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