Sterling continued its recent surge against the dollar as the cross climbed by over half a cent during trading today. Starting the day at $1.6614, GBP/USD exchange rates rose throughout the day to reach a high of 1.6675, the highest we have seen rates since 13th March. Today's move means the pound has now gained nearly 1.3% in the last week, wiping out the gains made by the dollar following the U.S. Federal Reserves tapering announcement on the 20th.
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To put the last weeks movements into monetary terms, a £200,000 trade into dollars will now see you receive around $4.100 more compared to the same trade secured last Monday. It once again highlights how quickly things can change in the FX markets and how important it is to know what tools are available if you are thinking about buying or selling dollars.
What are some of the tools available?
Forward contract
A forward contract can help protect you from adverse market movements and is useful for managing your budget. You 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.
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.
Limit order
With a limit order you specify the rate you are hoping to achieve – a price that may not be currently available. Your currency will automatically be purchased if the market exceeds this rate, meaning you get the price you want. This type of contract is particularly useful when the markets are moving in a positive direction for you.
Stop loss order
A stop loss order instructs me to buy your currency if the exchange rate goes down to a pre-determined level. When combined with a limit order, you can hold out for a better rate knowing you are protected from a sudden fall in the market.
If you have a requirement to buy or sell dollars in the coming weeks and would like to know what rates of exchange I can offer or would like more information on the different types of currency contract, use the link below to complete the contact form or call me directly on 0044 (0) 1442 892065.
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