What if the exchange rate improves once I have booked a forward contract? (Jonathan)

A forward contract is one of the most important details anyone who has a currency requirement in the future can consider. Particularly in the kind of market we are in at present, i.e a declining one.

A forward contract allows you to book todays rate forward for up to two years. Once a deal is booked a deposit is payable (approximately 10% but it is negotiable) and you choose for how long you want the contract to run. Throughout the duration of this contract you are guaranteed 100% the rate you booked at. This offers peace of mind and security in a market that is known for being risky and full of surprises.

The downside is that if you book forward, you are unable to take advantage if the rate moves in your favour. For most clients this is a price worth paying.

More often than not you will find clients are more upset to discover they would have been better by booking forward, (i.e they do not book and end up watching the rate fall), then to discover they would have not been better booking forward (they book forward and the rate improves).

No one can tell you exactly what will happen on Exchange rates but we can provide detailed forecasts. Whenever I speak to a client with a longer term requirement the forward contract will be highlighted so that from an early stage in the process, the client knows they have options.

Whilst there were improvements in economic data last week for the UK, the main events in Europe weighed on GBPEUR performance. Further QE (Quantitative Easing – which weakens a currency, speak to me on [email protected] to find out more) looks set to weaken the pound and we have UK GDP data this week which could easily open the door to further losses.

If you have a currency requirement to consider why not get in touch to find out all of your options. The gamble is doing nothing in this kind of market. Please contact me Jonathan for further information [email protected]