FOR­WARD THINK­ING

As the UK pre­pares to say au revoir to the EU, Laura Par­sons re­flects on what has been an event­ful year for the cur­rency mar­kets and con­sid­ers what might im­pact your money trans­fers to France in 2017

Living France - - Contents - Laura Par­sons is a cur­rency an­a­lyst at TorFX torfx.com

Laura Par­sons looks at what might af­fect your money trans­fers in 2017

It’s a bit of an un­der­state­ment to say that 2016 was a pretty crazy year for fi­nan­cial mar­kets. It be­gan chaot­i­cally with the stock mar­ket crash in China and only pro­ceeded to get more volatile as the UK ap­proached the EU ref­er­en­dum and ul­ti­mately voted in favour of Brexit.

While all fi­nan­cial mar­kets ex­pe­ri­enced some el­e­ment of up­heaval in the im­me­di­ate af­ter­math of the vote, the cur­rency mar­ket recorded par­tic­u­larly dra­matic shifts.

RE­VIEW OF 2016

The pound, which prior to 2016 had been hold­ing its own against cur­ren­cies like the euro and US dol­lar thanks to the com­par­a­tively strong per­for­mance of the UK econ­omy, plum­meted. Ahead of the ref­er­en­dum, an­a­lysts had pre­dicted that the pound could drop to par­ity against the euro in the event of Brexit (where one pound is equiv­a­lent to one euro), and three months af­ter the event, GBP/EUR was well on its way to mak­ing this es­ti­ma­tion ac­cu­rate.

On the eve of 23 June the GBP/EUR ex­change rate was trend­ing in the re­gion of 1.31, but in Oc­to­ber the pair­ing had crashed to a five-year low of 1.10. This his­toric slump of 21 cents meant that those mov­ing money to Europe were re­ceiv­ing sub­stan­tially less than they would have done pre-Brexit, while those send­ing money back to the UK from the con­ti­nent were en­joy­ing far greater re­turns.

To put this in real terms, the ster­ling slide meant that any­one trans­fer­ring £200,000 to Europe when GBP/EUR was at its low­est point would have achieved 48,000 fewer euros than im­me­di­ately prior to the vote. But are there fur­ther losses to come? And what can you do to make sure you’re get­ting the most from cur­rency trans­fers to France in 2017?

FORE­CAST FOR THE YEAR AHEAD

The pound was al­ready do­ing less than bril­liantly when UK Prime Min­is­ter Theresa May sent it reel­ing fur­ther by as­sert­ing that Ar­ti­cle 50 (the leg­is­la­tion that will for­mally trig­ger the UK’s exit from the EU) would be ac­ti­vated by the end of Q1 2017.

As many had hoped the ac­ti­va­tion would be de­layed un­til Bri­tain was eco­nom­i­cally and po­lit­i­cally pre­pared for the con­se­quences, the prospect of ac­tion be­ing taken by the end of next March proved tough to swal­low and the pound was swiftly driven from a three-year low against the euro to a five-year low.

The High Court later ruled that Ar­ti­cle 50 couldn’t be ac­ti­vated with­out a par­lia­men­tary vote, and the prospect of ei­ther the leg­is­la­tion be­ing de­layed or a ‘hard Brexit’ (whereby the UK would lose ac­cess to the sin­gle mar­ket in favour of tighter im­mi­gra­tion con­trols) be­ing avoided helped the pound push above 1.12 against the euro achiev­ing a multi-week high against the US dol­lar ahead of the US pres­i­den­tial elec­tion.

How­ever, if Ar­ti­cle 50 is in­voked next year, or if the Bank of Eng­land (BoE) un­leashes fur­ther stim­u­lus in an at­tempt to pro­tect the UK from the eco­nomic fall­out of that step, the pound to euro ex­change rate is ex­pected to spi­ral lower once more.

Pre­dic­tions that the pound could sink to par­ity are also more likely to be­come re­al­ity in the New Year.

A num­ber of other fac­tors may trig­ger GBP/EUR volatil­ity, in­clud­ing the US Fed­eral Re­serve’s stance on in­ter­est rates, the Euro­pean Central Bank’s ap­proach to as­set pur­chas­ing and the up­com­ing elec­tions in both France and Ger­many.

While some of these con­cerns may weigh on the euro (and hin­der the GBP/EUR down­trend to a cer­tain ex­tent) the pound’s long-term out­look re­mains neu­tral/neg­a­tive.

If you were plan­ning to pur­chase a prop­erty in France next year or need to send funds over­seas for any rea­son, this might all be sound­ing a bit bleak – but there are steps you can take to en­sure you se­cure the best pos­si­ble re­turn on your trans­fers and get more for your money in spite of Brexit fears.

MAX­IMIS­ING YOUR CUR­RENCY TRANS­FERS

So, what are your op­tions? Well, when it comes to man­ag­ing in­ter­na­tional money trans­fers, the two most pop­u­lar types of providers are banks and cur­rency bro­kers. His­tor­i­cally, banks have mo­nop­o­lised the world of for­eign ex­change – in part be­cause many peo­ple don’t

re­alise they have an­other op­tion or that the other op­tion could leave them bet­ter off fi­nan­cially. While banks will get your money where it needs to be, trans­fer fees and un­com­pet­i­tive ex­change rates could mean you don’t get as many euros for your pounds as you might ex­pect.

How­ever, as cur­rency bro­kers ne­go­ti­ate dif­fer­ent mar­gins to banks (mean­ing they ap­ply dif­fer­ent mar­gins to the cur­rency they buy from the in­ter­bank mar­ket be­fore they sell it on), they can of­fer bet­ter ex­change rates.

As high­lighted ear­lier on, even a small dis­crep­ancy in ex­change rates can mean the dif­fer­ence of thou­sands on larger trans­fers, so the first tip to be aware of is to check the rates a provider is able to of­fer you be­fore com­mit­ting to a trans­fer. Ad­di­tion­ally, some cur­rency bro­kers work on a fee-free ba­sis, mean­ing you’ll make fur­ther sav­ings.

There are steps you can take to en­sure you se­cure the best pos­si­ble re­turn on your money trans­fers in spite of Brexit con­cerns

STAY UP TO DATE

An­other top tip when it comes to mak­ing sure you se­cure the best pos­si­ble ex­change rate is to stay up­dated on the lat­est cur­rency news. As all the Brexit drama has shown, a sur­pris­ing com­ment from a po­lit­i­cal fig­ure or a dis­ap­point­ing eco­nomic fore­cast can have a sud­den and dra­matic im­pact on ex­change rates, but cur­rency trends can be tracked to a cer­tain ex­tent. As cur­rency bro­kers em­ploy in­dus­try ex­perts, they are able to of­fer spe­cial­ist mar­ket in­sight and pro­vide in­valu­able guid­ance re­gard­ing the best time to make a cur­rency trans­fer.

Some also give you the op­tion of sign­ing up to re­ceive free mar­ket up­dates, mak­ing it easy to stay in the loop and plan to move your money at the most op­por­tune time.

A fi­nal tip is to con­sider the dif­fer­ent trans­fer op­tions avail­able, such as for­ward con­tracts. A for­ward con­tract gives you the abil­ity to fix an ex­change rate up to two years in ad­vance of a trans­fer (and usu­ally only re­quires that you place a 10% de­posit). This strat­egy can be par­tic­u­larly use­ful when plan­ning a for­eign prop­erty pur­chase or em­i­gra­tion as it means you can bud­get ef­fec­tively and se­cure your trans­fer against fur­ther slumps in the ex­change rate.

In light of the ex­pec­ta­tion that the pound is likely to fall fur­ther in 2017, a for­ward con­tract could prove ben­e­fi­cial if you want to max­imise the amount you re­ceive for your cur­rency trans­fer.

SO, WHAT NEXT?

With the UK’s fu­ture re­la­tion­ship with the Euro­pean Union still un­cer­tain, peo­ple are un­der­stand­ably cau­tious about the prospect of mov­ing to France or in­vest­ing in the French prop­erty mar­ket.

How­ever, as it stands, the sit­u­a­tion is un­likely to change sig­nif­i­cantly for two years fol­low­ing the ac­ti­va­tion of Ar­ti­cle 50, so there are cur­rently no bar­ri­ers to you mov­ing for­ward.

If in doubt about your plans, talk things through with rep­utable, in­de­pen­dent in­dus­try ex­perts, and if you do need to move money abroad, get the right peo­ple on your side to make sure you get the best re­turn pos­si­ble.

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