Brexit and the pound: holidaymakers’ currency questions answered

If you’re planning a summer escape, but aren’t sure what Brexit means for your holiday money, then you’re not alone.

There have been so many queries about Brexit, the ongoing negotiations and the impact it has on exchange rates, that FairFX has set up a dedicated Brexit Support Desk.

Here are the answers to some of the most common questions the support desk has tackled.

What has the delay to October meant for exchange rates?

The pound has been on a rollercoaster journey against the euro since the 2016 referendum. The continued uncertainty that comes with the extension of Article 50 - delaying Brexit until 31st October - means the pound is still vulnerable to volatility.

So far though, the delay has had minimum impact on exchange rates as it was widely expected in the currency markets.

Can I protect myself against the impact of Brexit?

With so much uncertainty still surrounding Brexit, it’s very easy for the rates to move against you and no-one knows definitively where the rates are going.

The safest thing to do is to use a prepaid currency card to lock-in rates as soon as the market reaches a level you’re satisfied with, reducing the uncertainty around exchange rates.

What would a ‘customs union’ deal mean for exchange rates?

A tariff-free ’customs union’ is one of the biggest sticking points in the UK’s efforts to detangle itself from the EU.

Striking a customs union deal would be seen by many as a ‘softer’ form of Brexit, but it could be treated more favourably by the currency markets and result in less disruption for the pound than a ‘harder’ Brexit.

What will happen to the pound in a ‘no deal’?

If the UK crashes out of the EU with no deal, it’s likely the pound will fall across the board. In terms of the impact that would have on exchange rates, the pound could break below 1.10 against the Euro, and head towards the low 1.20s against the US Dollar.

Should I change leftover euros back to pounds before October?

If you have leftover euros from a trip and want to reduce the risk of being left with currency that’s worth less than it was, it is best to move funds sooner rather than later. It’s impossible to know what the future holds – particularly when it comes to Brexit.

If you haven’t yet bought currency for a summer holiday this year, then keep an eye on exchange rates and buy your currency when rates move in your favour. To avoid being stuck with leftover currency that may be lower in value than when you purchased it, use a prepaid currency card to lock in favourable rates.

Are there any advantages to Brexit?

Brexit provides a good opportunity for holidaymakers to explore destinations outside of the eurozone because the pound may be performing stronger against other currencies.

At the time of writing, the pound is up 170% against the Argentine Peso, which means holidaymakers heading to Argentina would get an extra £629 for every £1,000 exchanged compared to the day of the referendum.

Similarly, the pound is currently up 80% against the Turkish Lira compared to June 2016, leaving holidaymakers with an extra £444 for every £1,000 exchanged.

If you’re wondering how the currency markets might have an impact on your travel money this year, we’ve got you covered...
Our Top Tips for getting the most for your holiday money
1. Track currency: Monitor currency movements is a full-time job (literally) and it’s hard to know when to buy at the optimum time. So let us do it for you. Sign up to our Travel Money Rate Alerts and we’ll email you when markets move in your favour.
2. Lock-in rates: If you know you’re travelling later in the year, make sure you plan ahead. Preload your Currency Card to lock in rates and protect yourself from any potential future decline and fix your holiday spending money.
3. Buy wisely: Don’t leave changing your travel money until the last minute. Exchange rates at airports can be over 20% more expensive, which means you could lose over £100 of cash for every £1,000 you change.
4. Cards: Debit and credit cards are good backups but beware of ATM and transaction fees as well as the exchange rate you’ll be forced to use. Instead, use your FairFX Currency Card which is free to use in shops and restaurants.
5. Always use local currency: If you have the option of paying by card – or withdrawing cash – in Pounds rather than the local currency, always say no. This allows the other party to decide the exchange rate (a process known as Dynamic Currency Conversion) and it’s unlikely the rate they decide on will be in your favour. Our research shows that unsuspecting holidaymakers collectively pay out £490m in currency conversion fees, so don’t get caught out!

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