The fall in the value of the pound against the euro looks to be extending into a third day, having lost around 1% on both Monday and Tuesday.
The picture against the dollar has been a little less bleak, but while GBP/EUR remains up (just) compared to this time last year, GBP/USD is around 5% weaker.
It shows how deep the trough into which the pound is sliding against the euro could be, if the governor of the Bank of England Andrew Bailey’s comments about the risks of ‘stagflation’ – low growth (or no growth) and high inflation – come to pass over the next few months.
Worrying times, for anyone with a major currency transaction in the offing. Do you take the exchange rate on the table – still around 4 or 5% higher than the average of the past few years – or hope it rises?
At Smart we use a simple model for that decision: Budget, Risk, Solution.
First you work out how much you need for your plans – buying a property abroad, for example. That’s the budget element. Then you look at the potential risks, such as from a falling pound, as we’re seeing right now and could see a lot more of.
Then you apply the solution which is to remove those risks. That’s usually a forward contract to lock in the rate at which you can meet your required budget.
To discuss your budget, risk and solution, call your trade on 020 8003 4915.
