Carl Hasty, head of trading with Smart Currency Exchange, looks at whether now is a good time to forward buy euros with sterling closing on a three-year high against the euro.
The markets seem to be picking off the weaker Eurozone states one by one. First it was Greece and now they appear to have Spain in their sights as major structural deficiencies in the Spanish economy come to the fore.
“Spain is facing an economic situation of extreme difficulty...and anyone who doesn’t understand that is fooling themselves,” Prime Minister Mariano Rajoy recently told a meeting of his People’s Party in Malaga.
For a snapshot of Spain’s economic woes, consider the following: Santander, the Eurozone's largest bank, was recently selling off two-bedroom apartments around a communal swimming pool for 65,000 euros - that’s 50 per cent lower than they were selling at peak. The debt issues of the Eurozone’s weaker nations appear to be unravelling; clearly, the Eurozone crisis hasn’t gone away.
Take a look at sterling against the euro. At the time of writing it stands at £1/€1.21. Problems in the Eurozone member states, like those in Spain, have huge implications for the euro. At Smart, we take regular forecasts from the top analysts in the City to help us map out where the markets are expected to head. At present we’re seeing 3-month expectations against the Euro at 1.23, moving to 1.25 on a 12-month scale.
But these are only forecasts and, like any forecasts, they can change – particularly with exchange rates so volatile right now. Moreover, if you look at sterling versus the euro over the past few years, anything over 1.20 represents a very good rate – remember, the £/€ rate almost reached parity not that long ago.
Forward contracts
With this in mind, we think now could be a good time to ‘lock-in’ the current £/€ rate with a forward contract. A forward contract is a form of hedging which lets you reserve today’s exchange rate for a set period of time until it comes to settling your invoice.
Forward contracts are a very good way of helping a business to budget when importing or exporting. For instance, if your business knows now roughly how much currency it will need to purchase in the next twelve months or so, the current 1.21 exchange rate can be reserved today. Alternatively, you might wish to hedge – reserving, say, 50 per cent of the currency you need while purchasing the rest in, say, six months.
This probably represents a good hedge for three reasons. Firstly, you have locked-in at an attractive exchange rate. Secondly, our forecasts suggest the rate might get slightly better so you still get the chance to benefit from any upside to sterling by not purchasing all of your euros now. And finally, it would take a sizeable shift in market sentiment for the euro to start appreciating markedly against sterling – thus leaving yourself partially exposed in the short-term doesn’t represent a major risk.
To secure this rate a small deposit needs to be paid within two days of placing the order. The outstanding amount is paid just prior to the completion of the transaction.
To discuss your options give us a call on 020 7898 0500 or go to: www.SmartCurrencyBusiness.com
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
Wednesday, 18 April 2012
How Smart helped David from Enexos
Throughout history the sun has been used to give light and heat and its almost unlimited potential can provide more than enough energy for the whole planets growing energy demands. Many different methods have been used to capture its energy but by far the most simple method is the use of photovoltaic (PV) cells which trap the sun's energy and convert it into electricity.
London-based company Enexos were established in 2009. Their aim was to show that the use of solar power is sustainable and profitable for small and medium-sized businesses.
After the Labour Government introduced generous feed-in tariffs to encourage businesses to investigate renewable energy options, people were quick to invest and Enexos was bombarded with demand for their design and consultancy services to do with PV cells.
Shortly after the Coalition Government took the reigns from Labour in May 2010 a complete U-turn in policy was announced that detrimentally affected the availability of these feed-in tariffs. Understandably these changes enforced by the new Government meant that Enexos had to completely re-examine their business model and their financial dealings. This led them to Smart Currency Exchange....
David Finlay, Managing Director of Enexos told us what it was that made him choose Smart: “First and foremost, the rate we obtained was as good as we could ever realistically hope to get. Of almost equal importance was the fact that the transaction was both fast and completely hassle-free. When you throw in the added bonus that phoning Smart Currency means you can immediately talk to a person who is both knowledgeable and polite ... what's not to like?”
David continued: “For us it's a no-brainer, Smart Currency has a first option on all our future FX business. SME's like ourselves would do well to give them a call the next time they are considering buying or selling foreign exchange”
David expressed concern that not all businesses were aware of currency exchange experts and often use their bank to transfer money, a process which incurs high fees: “If our experience is any guide, SME’s in this country doing FX just can't afford to go through their banks. Banks negotiating FX for small corporates seem intent on only one thing … to maximise their own profits, even if this involves ripping off their customers in the process, and the sad thing is that most people don't even realise”
“The guys at Smart Currency Exchange are serving a very necessary economic function and I wish them well”
The message is clear. Managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. For more information, get in touch with the team at Smart Currency Exchange on 0207 898 0503.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
London-based company Enexos were established in 2009. Their aim was to show that the use of solar power is sustainable and profitable for small and medium-sized businesses.
After the Labour Government introduced generous feed-in tariffs to encourage businesses to investigate renewable energy options, people were quick to invest and Enexos was bombarded with demand for their design and consultancy services to do with PV cells.
Shortly after the Coalition Government took the reigns from Labour in May 2010 a complete U-turn in policy was announced that detrimentally affected the availability of these feed-in tariffs. Understandably these changes enforced by the new Government meant that Enexos had to completely re-examine their business model and their financial dealings. This led them to Smart Currency Exchange....
David Finlay, Managing Director of Enexos told us what it was that made him choose Smart: “First and foremost, the rate we obtained was as good as we could ever realistically hope to get. Of almost equal importance was the fact that the transaction was both fast and completely hassle-free. When you throw in the added bonus that phoning Smart Currency means you can immediately talk to a person who is both knowledgeable and polite ... what's not to like?”
David continued: “For us it's a no-brainer, Smart Currency has a first option on all our future FX business. SME's like ourselves would do well to give them a call the next time they are considering buying or selling foreign exchange”
David expressed concern that not all businesses were aware of currency exchange experts and often use their bank to transfer money, a process which incurs high fees: “If our experience is any guide, SME’s in this country doing FX just can't afford to go through their banks. Banks negotiating FX for small corporates seem intent on only one thing … to maximise their own profits, even if this involves ripping off their customers in the process, and the sad thing is that most people don't even realise”
“The guys at Smart Currency Exchange are serving a very necessary economic function and I wish them well”
The message is clear. Managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. For more information, get in touch with the team at Smart Currency Exchange on 0207 898 0503.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
Thursday, 22 March 2012
A simple way to save money
For many years, doing business internationally was easy – exchange rates remained relatively stable and budgeting for contracts overseas was straightforward. However, with the advent of the credit crunch, exchange rate volatility has made international trade incredibly tough for many businesses.
Fortunately, one way to protect your business and profit margins in these uncertain times is to use an international payment specialist, as Denis McLeod of Capitol Industrial Batteries Systems, which manufactures and imports train batteries from the Far East, has found out. “We buy several hundred thousand US dollars per year, so even a 1 cent movement either way can equate to a significant loss if you don’t protect yourself effectively. I buy forward on orders. This enables me to secure a rate today and pay when the order becomes due a few months down the line. I preserve cash flow in the business, but lock in an exchange rate. This means I know the exact margin and that it will not be eradicated by adverse market movements”
With banks still reeling from the credit crunch, international payment specialists – independent companies that specialise purely in foreign exchange – are becoming increasingly valuable service providers to SMEs.
“We offer better than bank exchange rates and a level of proactivity and service that companies have never had from their bank,” explains Charles Purdy of international payment specialist Smart Currency Exchange. “On an average transaction, we save our clients between 1-2 per cent against their bank’s exchange rate, which equates to thousands over a year”
Denis McLeod agrees: “We bought $150,000 forward through Smart Currency Exchange and saved around £1,000 against what our bank was offering. In addition, Smart helped us to buy at the right time when the US dollar rate was much higher and compared to today’s exchange rates we avoided a £5,000 loss on the contract.”
The message is clear. Managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. As members of the Rail Alliance, the team at Smart Currency Exchange have a unique understanding of the rail industry and the challenges faced when doing business internationally. To find out more go to… or call 0207 898 0503.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
Fortunately, one way to protect your business and profit margins in these uncertain times is to use an international payment specialist, as Denis McLeod of Capitol Industrial Batteries Systems, which manufactures and imports train batteries from the Far East, has found out. “We buy several hundred thousand US dollars per year, so even a 1 cent movement either way can equate to a significant loss if you don’t protect yourself effectively. I buy forward on orders. This enables me to secure a rate today and pay when the order becomes due a few months down the line. I preserve cash flow in the business, but lock in an exchange rate. This means I know the exact margin and that it will not be eradicated by adverse market movements”
With banks still reeling from the credit crunch, international payment specialists – independent companies that specialise purely in foreign exchange – are becoming increasingly valuable service providers to SMEs.
“We offer better than bank exchange rates and a level of proactivity and service that companies have never had from their bank,” explains Charles Purdy of international payment specialist Smart Currency Exchange. “On an average transaction, we save our clients between 1-2 per cent against their bank’s exchange rate, which equates to thousands over a year”
Denis McLeod agrees: “We bought $150,000 forward through Smart Currency Exchange and saved around £1,000 against what our bank was offering. In addition, Smart helped us to buy at the right time when the US dollar rate was much higher and compared to today’s exchange rates we avoided a £5,000 loss on the contract.”
The message is clear. Managing your foreign currency exposure effectively is a vital requirement of any business that deals internationally. As members of the Rail Alliance, the team at Smart Currency Exchange have a unique understanding of the rail industry and the challenges faced when doing business internationally. To find out more go to… or call 0207 898 0503.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
Currency markets – a long, bumpy ride ahead?
Carl Hasty, head of trading with Smart Currency Exchange offers five reasons why further exchange rate fluctuation is on the horizon.
1 Unrest in the Eurozone
As long as instability in the Eurozone continues to play out – and there is certainly no end in sight – the value of the euro will fluctuate. The Eurozone’s list of problems goes on and on – from huge debts in the likes of Greece, Spain and Italy to disagreements about how such debts should be tackled. Is greater fiscal integration the way forward? How long does the ECB keep on handing out bail-outs? There are more questions than answers – leading to euro instability. In theory, the issues outlined above would lead to further weakening of the euro in the coming months. However, other currency regions around the world are not without their own problems.
2 Inflationary threat
The phrase ‘quantitative easing’ has entered the mainstream as central banks in the UK, Europe and US have gone into overdrive to try and stave off recession. Around £275bn has been injected into banks in the UK. The European Central Bank recently pumped €529.5bn into Europe’s banks – on top of €489.2bn of similar loans injected in December. In the US the Fed put in $600bn in 2011. Monetary injections of such magnitude represent unchartered territory for Western financial systems. Nobody knows what affect they will have on inflation and the value of respective currencies in the UK, Europe, US and beyond.
3 The US trade deficit
Importers of Californian wine will have noted that the sterling/dollar exchange rate has been volatile of late. The US is a strange one. On the one hand, the dollar offers a safe haven for investors - especially given issues in the Eurozone. And yet, there is the US deficit. This is a country that had a trade deficit equivalent to $48.8bn in December of 2011. While the US may well have run deficits for the past three decades, the sheer size of its deficits in recent years is raising growing concerns. Before long, it will require growth to service this deficit or a weakening of the dollar may result.
4 Shifting global power
There are signs that China – possibly India also - are on a path to overtake the US and other Western countries in terms of economic might. Latin American countries such as Brazil are also a huge threat to Western economic power. The financial crisis of recent years has seen the rate of convergence between the developing world and the West increasing. While the Eurozone and the US have become locked in a cycle of slow or negative growth, the likes of India, China and Brazil have been relatively unscathed. This shift in economic might is a long-term trend – with huge implications for the purchasing power of hitherto ‘strong’ currencies, sterling included.
5 Threat of protectionism
According to a call to action published by the 11 leaders of international organisations which kicked off the debate at the recent Davos forum, protectionism is one of the top three worries at the start of 2012. The past twelve months have seen evidence of devaluation strategies by leading currencies. Last autumn, for instance, a bill was passed by the US Senate calling for retaliatory action against countries engaging in currency manipulation – a signal of sentiment in the US right now. Importing wine from Australia? The Reserve Bank of Australia stated recently it could move to weaken the Australian dollar if conditions required it. Actions to devalue currencies in wine exporting countries such as Argentina and Chile have also been noted in recent times.
Hedging as an option
Exchange rate fluctuation is a critical issue for UK wine importers. If your business imports or exports wine, a robust currency strategy is a sensible way forward at a time of global uncertainty. Hedging options such as forward contracts can negate the currency risk of doing business abroad. There is a range of options to suit all circumstances and varying levels of attitude to risk.
At Smart Currency, we update our views on the euro/sterling exchange rate on a daily basis. We also produce on a monthly basis our Outlook report which pulls together our thoughts and those of the mainstream banks on where to next for exchange rates. Download your copy now by clicking here http://www.smartcurrencybusiness.com/freeOutlook.aspx or call us on 0207 898 0503to discuss your situation.
1 Unrest in the Eurozone
As long as instability in the Eurozone continues to play out – and there is certainly no end in sight – the value of the euro will fluctuate. The Eurozone’s list of problems goes on and on – from huge debts in the likes of Greece, Spain and Italy to disagreements about how such debts should be tackled. Is greater fiscal integration the way forward? How long does the ECB keep on handing out bail-outs? There are more questions than answers – leading to euro instability. In theory, the issues outlined above would lead to further weakening of the euro in the coming months. However, other currency regions around the world are not without their own problems.
2 Inflationary threat
The phrase ‘quantitative easing’ has entered the mainstream as central banks in the UK, Europe and US have gone into overdrive to try and stave off recession. Around £275bn has been injected into banks in the UK. The European Central Bank recently pumped €529.5bn into Europe’s banks – on top of €489.2bn of similar loans injected in December. In the US the Fed put in $600bn in 2011. Monetary injections of such magnitude represent unchartered territory for Western financial systems. Nobody knows what affect they will have on inflation and the value of respective currencies in the UK, Europe, US and beyond.
3 The US trade deficit
Importers of Californian wine will have noted that the sterling/dollar exchange rate has been volatile of late. The US is a strange one. On the one hand, the dollar offers a safe haven for investors - especially given issues in the Eurozone. And yet, there is the US deficit. This is a country that had a trade deficit equivalent to $48.8bn in December of 2011. While the US may well have run deficits for the past three decades, the sheer size of its deficits in recent years is raising growing concerns. Before long, it will require growth to service this deficit or a weakening of the dollar may result.
4 Shifting global power
There are signs that China – possibly India also - are on a path to overtake the US and other Western countries in terms of economic might. Latin American countries such as Brazil are also a huge threat to Western economic power. The financial crisis of recent years has seen the rate of convergence between the developing world and the West increasing. While the Eurozone and the US have become locked in a cycle of slow or negative growth, the likes of India, China and Brazil have been relatively unscathed. This shift in economic might is a long-term trend – with huge implications for the purchasing power of hitherto ‘strong’ currencies, sterling included.
5 Threat of protectionism
According to a call to action published by the 11 leaders of international organisations which kicked off the debate at the recent Davos forum, protectionism is one of the top three worries at the start of 2012. The past twelve months have seen evidence of devaluation strategies by leading currencies. Last autumn, for instance, a bill was passed by the US Senate calling for retaliatory action against countries engaging in currency manipulation – a signal of sentiment in the US right now. Importing wine from Australia? The Reserve Bank of Australia stated recently it could move to weaken the Australian dollar if conditions required it. Actions to devalue currencies in wine exporting countries such as Argentina and Chile have also been noted in recent times.
Hedging as an option
Exchange rate fluctuation is a critical issue for UK wine importers. If your business imports or exports wine, a robust currency strategy is a sensible way forward at a time of global uncertainty. Hedging options such as forward contracts can negate the currency risk of doing business abroad. There is a range of options to suit all circumstances and varying levels of attitude to risk.
At Smart Currency, we update our views on the euro/sterling exchange rate on a daily basis. We also produce on a monthly basis our Outlook report which pulls together our thoughts and those of the mainstream banks on where to next for exchange rates. Download your copy now by clicking here http://www.smartcurrencybusiness.com/freeOutlook.aspx or call us on 0207 898 0503to discuss your situation.
Wednesday, 21 March 2012
Budget Comment from Charles Purdy
In response to The Chancellor, Charles Purdy, MD of Smart Currency Exchange said:
The Government is very clear on the way forward with UK businesses being the key driver of UK economic growth. The focus of the Chancellor in today’s budget was to help businesses double exports to £1 trillion, help business to invest for the future by reducing corporation tax and also make available additional incentives for businesses to invest in technology and in deprived areas.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
The Government is very clear on the way forward with UK businesses being the key driver of UK economic growth. The focus of the Chancellor in today’s budget was to help businesses double exports to £1 trillion, help business to invest for the future by reducing corporation tax and also make available additional incentives for businesses to invest in technology and in deprived areas.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
Tuesday, 21 February 2012
A few minutes with Gavin Baldwin, Trinity House
Trinity House is an international art dealership who have recently established a new gallery in New York. We caught up with Gavin Baldwin, who handles Trinity House’s financial affairs:
“We convert a sizeable amount of foreign currency throughout the year; in some cases the weak pound has helped us. Our most recent requirement has been to purchase US Dollars for our New York Gallery. The market has been very volatile and to capture the best rate has been a struggle of late as global economic woes have coincided with strength in the US Dollar”. It was because of this that Gavin started looking at currency specialists, and ended up working with Smart:
“We get the best exchange rates through Smart Currency Exchange and save thousands of pounds against what our bank would offer. Above all though, Smart are always incredibly proactive. They provide clear and concise market analysis to help guide my decision as to when to buy. If the exchange rate suddenly moves one way or the other, they call me straight away to keep me informed. Their service has been hugely beneficial to us, especially in regards to our most recent requirement where they helped us save a significant amount.”
To see how Smart can help your business, get a free, no-obligation quote now by calling 020 7898 0500 or clicking here.
Prospects for the euro/sterling relationship in 2012
Carl Hasty, head of trading at Smart Currency Business looks at the prospects for the euro/sterling relationship in 2012.
One of the more unedifying aspects of the ongoing euro crisis was when members of the French government recently decided to take a few pot-shots at the UK economy. As relations at diplomatic level turned increasingly sour around the turn of the year, French finance minister Francois Baroin told a European radio station, "the economic situation in Britain today is very worrying, and you'd rather be French than British in economic terms."
While there can no question that jibes such as this help nobody, they do raise an interesting question: which country is better placed right now – France or the UK? Moreover, is the UK in a stronger position than its neighbours in the euro zone? The answer to this question does, of course, have huge implications for the euro/sterling relationship, a relationship UK importers will be watching closely in the coming months.
Against sterling, the euro weakened at one stage in January to €1.2165/£1 - its lowest level for over a year. It’s not difficult to make a case for a further weakening of the euro in the coming months. Watching events unfolding in Greece, where rioters have taken to the streets at the prospect of further austerity measures, it’s easy to see why there is considerable nervousness around this increasingly beleaguered currency. If Greece were the euro zone’s only weak link, the currency might hold strong. The concern, however, is that events in Greece will be replicated in the likes of Italy, Spain, Portugal and even Ireland.
One word characterises the whole situation: uncertainty. We are in unchartered territory, the euro as a currency never having had to withstand anything remotely like the pressures it is currently under since its conception in 1999. As such, we wouldn’t expect any significant appreciation for the euro against most currencies in the short term unless the currency it is being paired with suddenly develops significant problems of its own.
Why, then, is euro/sterling not something more like €1.40/£1 or maybe even €1.50/£1? The short answer to this is that the fundamentals that underpin sterling as a currency aren’t looking particularly rosy either. Government debt in the UK is now a whopping £1 trillion and a double-dip recession looks a 50-50 bet.
So there is no certainty in where to next for the euro/sterling exchange rate. Further weakening of the euro against sterling is a decent bet in 2012 as problems in the euro zone continue to play out. There was a similar sentiment expressed at the start of 2011 and it is worth noting that a lot of the year was spent with sterling below €1.15/£1.
Therefore timing can be critical when buying euros. It has to be remembered that there could be a long period between placing your order and actually paying your invoice. This will expose you to significant risk and possible losses on your purchases if the euro did appreciate. This can be avoided by using a forward contract. It may sound complicated but is very straightforward and would ensure that you fixed the price for euros well in advance. In fact you can do it as soon as you place your order.
If you are convinced that the euro is going to weaken against sterling I would always suggest buying half of your required euros using a forward contract. This way, the pain of the totally unexpected happening will be less, and you could still have some upside if the euro did weaken.
We update our views on the euro/sterling exchange rate on a daily basis. If you would like to discuss please get in touch. We also produce on a monthly basis our 'Outlook' report which pulls together our thoughts and those of the mainstream banks on where to next for exchange rates. It's always interesting to see what the experts are thinking. Download your copy now or call us on 020 7898 0500 to discuss your situation.
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