Political instability and uncertainty always result in currency instability. Therefore, being a business owner in the UK is difficult nowadays. It’s even more so when you deal internationally and have both income and expenses in a variety of currencies. The latest news surrounding Brexit caused GBP to flounder yet again, and this will continue happening at least until the matter is resolved.
To help you get through these trying times without massive losses to the business, you should be using various tools and services that will provide your currency holdings with some stability. Some of the available solutions even offer tips on currency management, which can help your business greatly.
Latest News on Brexit and What It Means for Currency Exchange Rates
As you can remember, Boris Johnson, the Prime Minister, said that Brexit will happen on the 31st of October regardless of any deals.
Well, that didn’t happen.
Now there will be a general election on December 12th and it’s up to that election to determine the future of Brexit. As it stands, the election might end up with a referendum that will equal to the one in 2016, which started this whole thing. Other options include:
- Brexit happening on January 31st 2020 with the existing deal.
- Brexit happening on January 31sr 2020 without the deal.
- Cancelling Brexit altogether.
It’s hard to predict which the outcome will be, but one thing is for sure, it will impact the currency exchange rate and the position of GBP on the international financial markets. And the uncertainty surrounding this whole thing is affecting it as well.
Brexit has already had a major impact on the UK economy, and the Pound Sterling has just started to recover from the plunge it took after the referendum of 2016. However, with this latest news, the risk is high that all this progress will be lost. As a business owner dealing internationally, one must prepare and try to secure the best currency exchange rates before it’s too late.
How to Manage Your Currencies in the Face of Brexit-Induced Uncertainty
The good news of all business owners is that today they have a rather reliable solution that can help protect them from massive shifts in currency exchange rates. To achieve this, you simply need to use specialized business FX services. These are rather varied, with WorldFirst, Moneycorp, and torFX being some of the leaders in the industry.
The main advantages of using these international currency transfer services include:
- Transfers are completely secure as leading companies use bank-grade encryption and a variety of additional security solutions.
- Transfer rates and FX margins are much lower compared to traditional banks. These services operate differently, so they are able to minimize the cost of currency transfers. In some cases, you won’t be charged any fees at all and the currency exchange rate will be close to the mid-market.
- Transfers can be completed much faster. In the majority of cases, you will be able to send and receive international payments near instantaneously.
Those advantages alone make using these FX services a better option than transferring your money through banks. However, it’s the hedging tools and currency counsel that these companies offer that make them most valuable in the present situation.
First of all, these services will provide you with opportunities to monitor currency exchange rates and save this information to make future predictions. Those with some knowledge and skill in FX trading will benefit greatly from this alone.
And if you aren’t an experienced trader, you can use the money transfer company’s counsel service to help you make predictions and secure the best rates. Using this kind of help is imperative in the unpredictable situation of today because the currency market might shift in an instant.
However, the main advantage offered by FX services is the hedging tools they provide. These allow you to secure the exchange rate at some specific point and keep it there for the next 6-12 months. For a business, especially a small one, this can be what makes the difference between survival and failure due to the economic uncertainty.
The tools usually offered by currency transfer companies include:
- Forward contracts.
These are good to use if you plan to make some big transfers in the future. This tool is often used by international real estate investors. However, you can also use it when you need to make big payments for supplies.
- Market order.
This tool allows you to choose the currency rate you would like to secure, and you’ll be alerted when the real rate reaches this level. There are many possible applications of market orders in business, so be sure to consult a currency specialist about how best you can use it for your company.
Bear in mind, however, that hedging tools aren’t perfect. Locking your exchange rates at some specific point that seems good today might turn out to be a loss if the FX rates shift in a more favourable direction in the future.
The uncertainty caused by Brexit makes this possibility real. Data from the last two years shows that GBP will, most likely, weaken again, regardless of the vote’s result. However, the problem with the international currency exchange market is that one can never be 100% sure about anything. But it’s always like this in any business. Hedging tools are a way to reduce that uncertainty, even if you do end up losing some money over time.
What Does the Future Hold for Pounds
As one can see from the interbank GBP/EUR exchange rate, the Pound had quite an eventful year. It’s not yet at the level it was before Brexit was first announced, but it’s slowly getting better. This trend has been almost consistently ongoing since August and even the return of uncertainty hasn’t caused it to fall significantly. At least not yet.
However, no one can know for sure whether this trend will hold as the debate around Brexit is renewed. Also, the upcoming election might be a cause of massive changes in the currency market. Therefore, it’s best to start thinking about how to secure currency exchange rates for one’s business now and win your company some much-needed stability during this time of potential economic instability.