As everyone gets ready to party this evening the same could not be said for the currency markets. With little out in terms in of eco-stats there was very little movement for any of the Sterling crosses on Wednesday.
GBP/EUR spent the majority of yesterday’s trading session within a 35 pip range while GBP/USD remained within 40 pips as the two graphs below show.
With little happening and without wanting to repeat myself with talk of interest rate decisions, stimulus programmes and inflation figures, I thought I would take the opportunity to remind our readers of the different ways you can purchase your currency and maximise the return of your transfer.
If you have a currency requirement in 2016 it is important to know what options are available to enable you make an informed decision. As we have said on a number of occasions this year it is almost impossible to try and predict which way the markets will move, however by using one of the four contract options listed below you can ensure you are protected from any potential adverse market movements
1. Spot Contract
The quickest, easiest and most popular way to buy and sell currency – you simply exchange one currency for another, whenever you need it. You have two days to send us the funds and, as soon as your funds clear, we’ll forward the currency to the designated account.
2. Forward Contract
A forward contract can help protect against market volatility, useful for managing your budget. You can set the price now for a transaction that will take place up to two years in the future, allowing you to fix the exact value of the currency to be paid, regardless of market fluctuations. Perfect if you don’t need to convert currency immediately, but you want to avoid the risk of sudden fluctuations in exchange rates.
You secure the forward contract with a margin of 10% of the total value of your transaction (you’ll need to pay this within two working days of agreeing the contract) and then pay the balance before the contract expires. Once secured, the agreed exchange rate will apply for the duration of the contract
3. Limit order
With a limit order you specify the exchange rate you are hoping to achieve – which may not currently be available. Your currency will automatically be purchased should your rate become available as a trading level, meaning you get the price you want. This type of contract is particularly useful if time is on your side and you can afford to wait until the market moves in your favour.
4. Stop loss order
A stop loss order instructs your broker to buy if the exchange rate goes below a pre-determined trading level. When combined with a limit order, you can hold out for a better rate while protecting yourself from a sudden fall in the market. This contract is perfect for budgeting and forecasting.
Contact us today
If you have any questions about the information listed above or would like to know more about how to register for a free, no-obligation trading account use the link below or call me directly on 01442 892 065.
Wishing you all a happy and healthy 2016.