Getting to grips with Brexit induced currency movements

If you need to send money overseas for any reason, you should take into account the Brexit effect on currency exchange rates.

It was obvious from day one after the referendum result was announced that the pound sterling was about to suffer a lasting negative effect, as it dropped immediately against the euro and other major currencies and is swinging like a yo-yo ever since. As a result, most expats and those planning to leave the UK have had major problems in deciding when to send money overseas, whilst hose already living overseas have been handed a smallish but welcome bonanza, as sending cash home results in gains.

With almost three years and endless, probably unstable negotiations yet to go, finding the best time to transfer funds isn’t going to get any easier. Sending due payments for the construction or purchase of your retirement villa is the perfect example of the present ‘suck it and see’ situation where choosing the wrong moment could result in the property costing rather more than you’ve bargained for. Even the end dates of the Brexit transition period are still being argued over, and there’s a lot more to come.

For example, a purchase of £300,000’s worth of US dollars at an interbank rate of 1.43 gets you $429,000 on one day, but if the next day’s rate drops to 1.39 as the result of bad Brexit news, you’ll only get $417,000, a major loss. Admittedly, the effect of politics on currency movements is a tough one to predict, but global uncertainty caused by negative developments is the key. The upcoming trade talks are likely to influence the sterling rate of exchange in a major manner, as businesses will use the results when deciding whether to stay in or leave the UK for a more trade-friendly location.

Other possible political developments such as a battle for the Conservative Party’s leadership are almost certain to affect exchange rates, with whoever finally gets the PM’s job a trigger for movement. Increased demands for either a second referendum or a countrywide vote on agreed Brexit terms would have a similar effect, as would a Bank of England decision to increase interest rates in order to control inflation. If you’re looking to transfer large sums during the next several years, getting to know a trustworthy currency broker is probable the best idea.