Consumers and businesses buying foreign currency or making payments should delay decisions after the EU Referendum vote to leave, foreign exchange benchmarking experts Consumer Intelligence advises.
Uncertainty after the decision could mean foreign exchange companies deciding to stop offering rates over the weekend as rates fluctuate, the company believes.
Markets close for the weekend tonight at 10pm and do not reopen until Monday morning at 9am by which time the sterling rate could have moved dramatically making it difficult to quote prices.
Dramatic swings on the foreign exchange markets create winners as well as losers – exporters will benefit from the pound dropping against major currencies while major financial services companies which use the dollar as their base currency will benefit when they convert earnings back into sterling.
However the Leave vote could also raise the cost of borrowing and could have an impact on insurance costs – motor insurance costs are already 15% up this year and could rise another 5% by the end of 2016.
Ian Hughes, Chief Executive of Consumer Intelligence said:
“We would strongly advise anyone planning to buy foreign currency this week to hold off and anyone including small business owners who has to make foreign currency payments should also delay if possible.
“The margins charged by banks and payments bureaux are likely to peak over the weekend if they are still quoting rates. By the middle of next week it should have settled down, although consumers may still lose out on Euros.
“Settling down is relative however as volatility on the foreign exchange markets is probably here to stay as investors hang on every word of the UK’s EU exit negotiations and speculators trade on the uncertainty.”
The uncertainty of the EU referendum has already hit the pound 1 – it started the year at around €1.35 and on the day the Referendum was confirmed it was around €1.29 and has been as low as €1.23. It has had less effect on the dollar – it started the year at $1.47 and has remained relatively steady but has dropped as low as $1.41.
Rates last July for the pound against the Euro were €1.41 so even comparing last year with now there has been a fall of around 10% while the dollar in July last year was around $1.56.
Find out how and why consumers are using international money transfers. The latest Consumer Intelligence International Currency Transfers Survey reveals a market poised for change.
Andy Buller, Key Account Director and Head of Travel Money
Andy has over 20 years’ experience within the financial services sector and has worked predominantly within the FX, wholesale bank notes and prepaid industries. In previous roles Andy has managed key relationships with many of the leading financial institutions including Commerzbank, Credit Suisse, American Express, RBS and Travelex.
1 http://www.xe.com/currencycharts/?from=GBP&to=EUR&view=1Y rates analysis on 23rd June 2016
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