There’s now just over a month until Britain goes to the polls for the EU Referendum, and it’s still unclear what the outcome will be. With the latest result from the Financial Times Poll of Polls currently showing 46% stay, 44% leave and 10% undecided (as of 17th May 2016), it seems to be too close for anyone to call.
This uncertainty appears to have been a significant factor in causing the Pound’s value to fall by around 9% since November 2015. It seems reasonable to assume that we will not see a recovery for as long as the uncertainty remains, although the longer term picture is harder to predict.
But as we’ve discussed throughout our Brexit coverage, there are still options to help you prepare yourself during this period of volatility, whatever happens on 23rd June. While there’s not long to go, we know this is still a major consideration for many of our customers when planning their international money transfers in the coming weeks.
With this in mind, we’ve put together some potential scenarios to help you consider what the best strategy is for you. These are based on examples from recent customers so we hope they’ll be a useful guide for you, but please remember that there are a range of factors that determine the rate you will get, including the current interbank rate, the amount you are sending, the currency you are buying and your payment method.*
Case 1: Expat Eric
Eric is a UK expat who retired to Spain a few years ago. He expects that Britain is going to vote to stay and he thinks the exchange rates will probably improve after the referendum.
But Eric knows that he doesn’t have a lot of flexibility in his budget and his pension might not go as far as he’d like if there is a significant change in exchange rates. So Eric decided he didn’t want to take the risk. Instead, he set up a Regular Payment Abroad, which means he’s locked in his pension amount of £1,200 per month at a rate of 1.25*, with no additional fees for these payments.
Eric can now sleep soundly at night (and during his afternoon siesta), because he knows exactly what his monthly budget will be. He won’t have to worry about the short term fluctuations in the exchange rate that tend to come during periods of political and economic uncertainty.
Case 2: Risky Richard
Richard has a comfortable life in his villa in the French Riviera. He generally sends himself about £10,000 per year split over a couple of payments, just to keep his account topped up. But he doesn’t have a set deadline for when he needs to send his next payment and he has enough in his French account to last until the end of the year if necessary.
Richard could afford to just sit and wait to see what happens next. But he’s a betting man and he wants to see if he can benefit from the current situation. He’s been following the markets closely and he thinks there’s an opportunity to secure a rate at the top of the range.
He’s decided to place a market order for £10,000 if we are able to offer him a rate of 1.30*. He’s not in any rush, so now he can just sit back and see if the order pays off for him.
Case 3: Small Business Sarah
Sarah has set up a small business importing fabrics from Germany. She has a number of invoices coming in from different suppliers, usually in the region of €1-2,000. There’s no set pattern for when these invoices arrive and her suppliers generally expect her to send payment within a few days. As a fairly new business, she knows the importance of maintaining these relationships for the sake of her reputation.
Sarah spends a lot of time reading online to understand her options. She had been trying to time the payments to catch a favourable rate, but she’s finding this increasingly time-consuming and difficult to manage.
She recently decided to re-evaluate her situation and do some calculations. She realised that on her latest payment of €1,200, even a 5 cent move from 1.25 to 1.30* would only save her €37. She has now concluded that, in the short term, rates are unlikely to change much in her favour. She’d rather just pay the bills as they come in and relax knowing that the payment will arrive on time.
What about you?
We hope this has helped you to think about the potential factors that might influence your decisions and what options are available to you. If you’d like to discuss your situation in more detail, please feel free to give us a call on 01753 859 159.
We’ll continue to share updates here to help you consider your options both before and after the referendum. Or you can read all our Brexit resources so far here.
*All rates are provided for indicative purposes only, using examples from recent anonymised customers. Rates will vary depending on a range of factors, including the current interbank rate, the amount you are sending, the currency you are buying and your payment method. For a quote, please contact us.
The details expressed in this transmission and accompanying documents are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. HiFX Europe Limited accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information. HiFX Europe Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009, registration 462444, for the provision of payment services. HiFX Europe Limited is a registered MSB with HM Revenue & Customs – Reg No: 12131222. HiFX is a limited company registered in England and Wales. Registered number:3517451. Registered office: Maxis 1, Western Road, Bracknell, Berkshire, RG12 1RT