Should I buy euros now? How can I protect the gains I have seen?

Pound to Euro rate Could next month's Brexit deadlines result in some volatility for GBPEUR rates?

With trading levels close to the best they have been in 16 months, there are numerous reasons to buy euros. Many clients who have been bravely holding out for a 1.20 trading level have been quick to capitalise, but there are others who believe things will improve further.

In my role as a currency specialist for one of the UK’s largest currency brokers I am continuously asked what will happen on exchange rates and this is the favourite topic right now. Anyone with a close eye on the rate in the last few years will recognise the rate has been above 1.20 a couple of times.. But then quickly come crashing down.

In each instance the reason can be partly attributed to sterling weakness, namely the threat of QE, or the realisation interest rates will be on hold a lot longer than expected. Things are no different on the sterling side and as such I would be cautious about expecting GBPEUR to hit 1.25 + in the coming weeks.

Getting the best rate is unsuprisingly a key aim for most clients. At the moment one of the most popular contract options we offer, which can really help you squeeze every bit out of the market is a Stop / Loss and Limit Order.

Limit – Say that I could offer you a trading level of 1.20 now. You may be satisfied, but what you really want is 1.22. As much as I would like to offer you 1.22 I currently can’t because the market is not there. What I can do is offer a ‘Limit’ order where we put into the market an automatic order at 1.22. Utilising our advanced computer systems, this order type means that as soon as the market reaches 1.22 (if it does) we will buy your rate out automatically. Markets move every couple of seconds so the use of such a contract type means that we can guarantee your exchange rate even if the rate only moves there for a few seconds. It saves the hassle of watching the market and gives peace of mind. And if your rate doesn’t hit, you can move it or cancel it completely.

Stop / Loss – Much like a limit but you choose a lower level at which we would buy out the deal if reached. So in the above example if you want 1.22 but wouldn’t want less than 1.19 (maybe you are a business and less than 1.19 eats too far into profits? Or maybe that dream holiday villa becomes unaffordable below 1.19) we put the order in at 1.19 and if the market drops to 1.19 we fill the order and you are guaranteed no further losses.

In such times as these where we are seeing impressive gains what you can actually do is move the above orders around. So as the market improves you can bring your Stop / Loss up so that you are captialising on the gains made, and in turn raise your Limit so that you can further enhance your rate if it looks like things will move further in your favour.

This is how savvy traders really ‘get the best rate’. It also works for people selling euros. The Stop / Loss in particular is popular for people selling euros as the general trend has been euro weakness. Some clients have lost thousands of pounds since September when the market started to move against them and had put Stop’s in at say 1.20 to protect their rate. Whilst the level they got when these trades filled was not as good as if they had the done the deal last year, they protected against further losses.

As painful as it may be to see the 350,000 euros you have in your Spanish bank following your Villa sale worth nearly 15,000 GBP less than when you looked at rates in September, you will unfortunately more than likely keep coming up short by making that same comparison. The use of a Stop / Loss and Limit here again can help to minimise any further losses and capitalise on any favourable movements.

As well as the above contracts I can also help secure your rates forward for up to two years. This option has been popular too of late as no one knows what could happen. The real gamble at the moment on exchange rates is doing nothing…

If you would like to find out more about all of your options on the GBPEUR rate please feel free to make personal contact on jmw@currencies.co.uk – Just let me know what you are looking to do and I can make sure you have all the information to make an informed decision. There is still much that could happen this week that could move the markets so by keeping me informed I can ensure you don’t miss important events.