Brexit: your currency questions answered
Confused by Brexit? Unsure what it means for your holiday money? There have been so many queries about Brexit ahead the UK’s scheduled departure from the EU on 31st October that FairFX has set up a dedicated Brexit Support Desk.
Here, Ian Strafford-Taylor, CEO of FairFX, answers some of the most common questions the support desk has tackled.
1. What impact has Brexit had on the pound?
As it stands, the pound is 12% lower against the euro since the day of the Brexit referendum in June 2016. This means Brits heading to Eurozone countries will now get £132 worth of euros less for every £1,000 exchanged than they would have just over three years ago.
The uncertainty that has shrouded Brexit negotiations including numerous MP votes, a change in Prime Minister and everything in between has played a leading role in the instability of the pound. While it has moved in both directions, it has failed to return to its pre-referendum rates against the euro and holidaymakers today are worse off as a result.
2. Will the pound ever recover against the euro after Brexit?
Brexit is an unprecedented event so we’re entering unchartered territory for the pound. This makes it difficult to predict exactly what will happen.
If the pound does recover and stabilise at pre-referendum levels, we need to still be prepared for more turbulence as we continue on the Brexit journey.
3. Will the pound ever go below parity?
The pound and euro have never equalled each other, although it has been close on occasion - especially in the aftermath of the 2008 crash. As for the US dollar, the lowest the pound has been is 1.0420 which happened over thirty years ago, in 1985.
For the pound to go below parity against either currency would be unprecedented, but there would be more chance of that happening in the event of a no-deal than if the UK leaves with a deal.
4. I’m travelling to Europe after the Brexit deadline. When should I change my money?
In the last month alone we’ve seen the pound fluctuate 5% against the euro including a five-month high in October, so it’s been a rollercoaster journey to say the least.
As part of a wider analysis we recently found that if you bought currency when rates were at their lowest so far in 2019 compared to when rates were at the highest, the nation would have collectively lost £3.8 billion (that’s around €123 each for every £1,100 exchanged) just by exchanging currency on the ‘wrong’ day.
The safest way to guarantee getting an exchange rate you’re happy with is to lock-in the rate on a currency card when the pound is doing well. It also means you avoid losing money when you return from your trip and have to change any leftover cash back into pounds if the exchange rate has worsened.
5. What should I do with any leftover travel money I have?
We’ve found that on average people return from holiday with around £177 worth of leftover currency. If it’s on a currency card that’s fine, you can save it for future trips or switch to a different currency, but if that’s in cash you’re left at the mercy of buy-back rates which might not be in your favour.
If you have any leftover travel cash and want to reduce the risk of being left with currency being worth less than it was, it’s always prudent to change your money back sooner rather later as it’s impossible to know what the future holds – particularly when it comes to Brexit.
6. Is there any way to protect myself against the impact of Brexit?
The best way to protect yourself and your money against the impact of Brexit is to lock in your currency requirements as soon as exchange rates reach a level you’re happy with. It’s all relative, so don’t expect the pound to rocket back to pre-referendum rates, but if the rate on offer is good considering the current circumstances, locking in is a sensible option.
There’s still so much uncertainty surrounding Brexit and it’s very easy for the rates to move against you, so staying alert to the news agenda and the pound’s movements will help you act fast and get more for your money.