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Surging sterling gives dilemmas over expat incomes
| Published: | 25 Feb at 6 PM |
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The surge in the £ sterling over the last few months has seen the currency bounce upwards by more than 10 per cent, in contrast to a good number of other currencies seen to have moved in the opposite direction.
The gloomy outlook at the beginning of 2013 has slammed into reverse, with the pound faring better by far than the dollar and the euro. Reasons include an overall expectation that rates will rise in the near future, the booming housing market and improving retail sales figures.
On the negative side, employment data is questionable and, with inflation now set below 2 per cent, there’s less need to raise interest rates, thus creating the risk of a weaker pound. Experts believe the currency will strengthen further against the euro and the Canadian and Australian dollars, although it may fall against the US dollar.
Taking into account the above, most Forex professionals are advising expats who receive their income in sterling to take advantage of the present situation by converting a proportion whilst rates are high. If pensions are paid monthly, it’s possible to fix the exchange rate well into the future to protect against possible falls in sterling at a later date.
Forward contracts are the way to go, but those following that road should shop around for the most favourable rates. The trick to watch out for as regards less than transparent currency brokers is the ‘bait and switch’ game, during which you’re offered an indicative rate before opening your trading account which drops like a stone when you start to convert your sterling.
To guard against this and other such scams, you’re advised to get accounts set up and planned a good few days before you need to convert. This gives you a far stronger position from which to compare prices accurately and make the right decision.
The gloomy outlook at the beginning of 2013 has slammed into reverse, with the pound faring better by far than the dollar and the euro. Reasons include an overall expectation that rates will rise in the near future, the booming housing market and improving retail sales figures.
On the negative side, employment data is questionable and, with inflation now set below 2 per cent, there’s less need to raise interest rates, thus creating the risk of a weaker pound. Experts believe the currency will strengthen further against the euro and the Canadian and Australian dollars, although it may fall against the US dollar.
Taking into account the above, most Forex professionals are advising expats who receive their income in sterling to take advantage of the present situation by converting a proportion whilst rates are high. If pensions are paid monthly, it’s possible to fix the exchange rate well into the future to protect against possible falls in sterling at a later date.
Forward contracts are the way to go, but those following that road should shop around for the most favourable rates. The trick to watch out for as regards less than transparent currency brokers is the ‘bait and switch’ game, during which you’re offered an indicative rate before opening your trading account which drops like a stone when you start to convert your sterling.
To guard against this and other such scams, you’re advised to get accounts set up and planned a good few days before you need to convert. This gives you a far stronger position from which to compare prices accurately and make the right decision.
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