Holidays to the US more expensive due to the British pounds 30 year low against the dollar

British holidaymakers visiting the Atlantic are currently facing higher prices as the pound corrodes with the US dollar, say experts. For the first time, the Sterling has gone below $1.48 since April, which translates to 14% fall as compared to $1.71 it traded in the summer of 2014. This change has changed everything as meals, hotel rooms, theme park tickets and car hire have become more expensive for British families explorers to the United States.

Consequently, the currency analysts say that the worse is yet to hit the pound as it is at a risk of hitting a 30-year low estimated at $1.30. This will raise shopping trips’ costs to the level of New York and Disneyland in Orlando, and Florida’s holidays. However, these changes will raise British’ exports to the American market as products made in British factories like cars and Scotch whisky will be more affordable to American buyers.

They recall that the last time the British pound traded at a low rate of $1.30 was the time when Margaret Thatcher was British Prime Minister, and Ronald Reagan was the president of the United States. According to David Swann, who is Travelex’s bureau de change head of pricing, the rise in US dollar means that UK holiday travelers will see their pounds’ worthless in the United States. He added to say that it is unfortunate for the British travelers who have already planned a trip to America.

Travelex said that currently £500 exchanges for $725, which is $116 lower than its value in July 2014. If the pound’s value falls to $1.30 on foreign exchange markets, then it is estimated that travelers exchanging a £500 would receive less than $650, which translates to $200 less that its value in mid-2014.

Last month the Federal Reserve increased the interest rates for the first time in almost a decade now, from 0 and 0.25 percent to 0.25 and 0.5 percent. Bank of England is claimed to be raising interest rates this year in the UK. This will increase the mortgages’ costs and other loans for residents of the UK. However, analysts have given a warning against this step saying that if Britain hikes the rates, America will get more and this will lead to the pound dropping even further.

Is it harder for tourists to exchange money in Argentina?

For those who have been to Argentina in the last four years, it is evident that you have found out that the excellent deal is to have your money in big bills and exchange it illegally. Travelers from all over the world are currently receiving more for their currency, which is due to the Argentina’s banning of black and illegal markets that used to trade for 30% less that the required official rate. For Argentinian citizens who wanted the safety of dollars, they accepted lower rates from black markets as this was the only way to escape the government’s tight currency measures.

Currently, all these activities are taking another route. President Mauricio Marci, earlier this month, eliminated barriers on how many pesos can be exchanged for dollars and other currencies. The climax of those barriers led to Argentinian pesos’ official value to crumble overnight that dropping by 30% in less than 24 hours. However, on the black market, pesos rose slightly.

According to Dr. Federico Weinschelbaum, a professor and an economist at Universidad de San Andrés in Argentina, the abolition of this gap that exists will result in a steadier economy for Argentina on the long-run. On the short-run, Argentina’s economy that is running in the background is likely to rise. Those who are highly affected by this change are the ones who depended fully on the black market as the main source of income, which is clearly a significant amount.

The centre of Buenos Aires’s downtown, the extremely busy streets have been surrounded by shops and the unique ambient sound of women and men shouting “Cambio! Dolares, Reales, Euros, Cambio,” is common, giving both locals and foreigners the same best exchange rate as that of a black market for the past few years. These black market operators are referred to as “arbolitos” meaning little trees because they do not stay for long in one location as they exchange green paper. The currency that is exchanged on the black market is referred to as dollar blue. The arbolitos have been in operation for over a decade now, but in November 2011, they expanded into a big forest. The black market expanded vigorously, and it was successful to the extent that it was almost becoming legal.

Even if exchanging currencies in a location outside of a designated exchange place or an official bank is illegal, it is common in Argentina to see police officers on black markets, but they watch transactions take place without doing anything.

A 24-year-old confessed that he has been working as a black market exchanger for the past seven years. He said that he started off as a seller of city tours, but for the past two years he has been making huge profits as an arbolito. He further added that on each block there are over 30 arbolitos, which translates to about 500 arbolitos on a single street. However, it is strongly believed that these numbers are yet to reduce soon. He says that in about three to four months there will be a remarkable decrease on the streets. The arbolitos are currently suffering from the economic punch, but they are continuing with their black market business for as long as they can. For them, this means that they can go on with their businesses as long as no new law enforcement has been put in place.

Many are saying that they have been told anything concerning their black market business as illegal. Though, they have been once pulled by Argentina’s Federal Administration of Public Income. They normally don’t take anything serious as they demand identification and take some information and leave.

Pato, who is a middle-aged owner of a newspaper kiosk selling on Florida Street, also said that he just fell into the black market business because getting into it was very simple.

Is it possible to never use cheques?

TransferWise founders clearly indicated that they have never used cheques before. Kristo Käärmann and Taavet Hinrikus said that they have never written a single cheque before the internet age. “I can’t recall ever using a cheque,” says Käärmann, who is 35 years old. He further says that “For nine years that I have been in London, I have received several chequebooks during accounts opening. I wasn’t aware what to do with the chequebooks since we hardly used them in Estonia.”

Fellow Estonian Hinrikus and Käärmann, co-founders of TransferWise’ electronic foreign exchange system, have similar experiences. Hinrikus say that “The banks didn’t provide any chequebook, and I’m glad that I never touched one.”

The two were shocked to find that in their mission of preparing the launch of their foreign exchange system in the US at the beginning of this year, cheques remain operational and actively used in the US.

“Americans use cheques a lot,” says Käärmann. “The US financial system uses cheques on a weekly or monthly basis. Americans use banks differently from us. Apart from working hard to meet licensing requirements, there is a need to adjust our product to the American market. ”

This is one of the escalating pains of TransferWire that began as an easy technique of Hinrikus and Käärmann of avoiding foreign exchange bank rates when they arrived in London for work in 2007.

They exchanged between £2,000-£3,000 cash a month. They decided to bank the money in each other’s bank accounts so that they can calculate the exchange rates of British banks. Some other friends joined them and in two years together they had saved banking fee of approximately £10,000-£20,000, which gave them the idea of launching the TransferWire peer-to-peer currency exchange as an online platform in early 2011.

Currently, the business is operating in the same way. It runs some bank accounts all over the world, collects money in one currency from customers and gives counterparties in other currency, pays each country from its accounts.

According to Käärmann, the model has progressed but hasn’t changed. He says, “When we began it was just a simple idea that used euros and pounds only. Occasionally it took some days to make transfers a success. Nowadays, we are using 400 different currencies, and the transfers are very fast. Also, we are the only agent that can transfer money from the UK to France in 17 seconds or less. We have set records on speed concerning international transfers.”

A major decline in foreign exchange in 2015

According to a major survey that was carried out in 2015, turnover in EUR/USD fell by 17% in October 2015, which translates to $640 billion per day. On the contrary, the turnover in AUD/USD rose by 8%.

A survey carried out in the key financial institutions that deal with the foreign exchange by the Bank of England has revealed that a 14% drop in trading volumes has been experienced since April 2015 and a 21% drop since a year ago. The Bank of England measures the vast volumes traded in the markets of global currency.

The survey further revealed that the average daily volume of FX that was traded in the UK in October 2015 was very huge, about 2148 billion or approximately 2.15 trillion dollars. This translates to two-thirds of the yearly GDP in the UK during an average day. This data revealed a noticeable drop in flows as compared to six months ago. However, this drop was still higher at 2481 billion.

Many of the transactions were from Foreign Exchange Swaps that are utilised by the company to circumvent against foreign currency threat in the future, which accounted for 1019 billion in total. According to the report, the huge fall between April and October was in the Spot FX market. It stated that “The turnover in all products dropped over the six months to October 2015. The FX spot turnover dropped by 24% that is $737 billion per day down to 34% during the previous year.”

Regarding the actual currency pairs, the report showed that the currency pair that dropped the most is the EUR/USD. Turnover in many currency pairs dropped. Ideally, the turnover in EUR/USD dropped by 17% in October 2015 to $640 billion every day. On the contrary, the turnover in AUD/USD rose by 8% while that in USD/CNY progressed higher, up by 3%. The largest currency pair currently is the USD/CNY.

There was no informative explanation from the report as to why trading volumes had dropped by a fifth over the last year. However, Jeremy Stretch of CIBC Capital Markets was pointed out by Yahoo Finance as using increased regulation as a factor.

Certainly, the regulation was promoted in many jurisdictions after the Swiss Franc debacle last January, after the SNB eliminated the cap on their currency leading to high losses for several brokers and their clients. This move by SNB led to regulators in the US to increase the minimum margin conditions on several institutional FX transactions, which would have resulted in an immediate drop in volumes as clients would have needed to set aside extra capital so as to receive the same leveraged volumes as compared to last year.

The elimination of the Franc’s cap resulted in several brokers being bankrupt as many traders lost their trading capital as well. This too might have had a small impact on trading volumes. Another reason that led to the drop in FX trading volumes is the dollar’s appreciation. This is because trading volumes are reported in dollars and the stronger currency translates into a reduction in overall volume as compared to using a different weaker currency to report the turnover. However, while this explains the drop in volumes during the year, an increase in the value of the reporting currency cannot elaborate the 14% drop in volumes from April 2015 as the dollar index merely changed in value from April to October 2015.

According to the BOE’s report, many of the marked drops were in Options Trading and Spot, which dropped from 973 billion to 737 billion between April and October. Spot Forwards and Options are the most preferred tools of speculators that explain why the trading volumes dropped extremely during that period.

The UK remains the key leader in the world of foreign exchange in line with trading volumes with a total turnover of 2148 billion in October.

Analysing Premier League clubs exposure to foreign exchange

There exists a single factor that is usually not recognised when the very rich clubs that belong to the English Premier League use millions of pounds for the period of the transfer window, that is, their exposure to foreign exchange.

The aspect of spending £50m on superstar midfielder may not be the most exciting aspect, but similar to all businesses, the forex is one crucial factor that requires closer attention by those who work behind the bars at football clubs. An extreme rate can simply cost millions of pounds.

In the current transfer window and economic wrangles in China, the global equity market rejects and lows in commodities have inflicted chaos all over financial markets. The Sterling has experienced great losses dramatically in the conversion from pound to euro mostly as the rate drops to a 12-month low due to plunging risk sentiment.

Since the clubs usually pay the players using the selling club’s local currency, extreme rates for pounds indicate that buying players from Europe are a huge investment by like ten percent in some cases. In the same line, the buying power of Europe has been boosted significantly.

These ridiculous rates will cost British teams several millions of pounds more than when paid in Euros during the summer window as compared to the month of January, which is a panic-buying period. The previous transfer window that closed at the end of month August, the GBPEUR high was 1.4386. Currently, the transfer window has fallen to 1.2888, which is very low.

Those that acted during the summer period are safe for feeling smug, especially when the players’ value has increased in the meantime, For instance, Manchester City’s investment in Kevin De Bruyne. This acquisition would cost significantly more than £55m that was paid during summer. A sharp spend despite it being currently injured.

To make sure that these rates are even worse for the clubs, they should be well informed when they are trading a player back to a continental club after purchasing him from one during the last transfer window, that the loss they are receiving is essential and that it does not cost them too much.

To overlook that Premier League football clubs function in a similar way to another international trading business is easy. Forgetting the currency risk is very expensive.

Could it be the end of Bitcoin transactions in Europe?

The European Commission (EC) is set to bring the anonymous transactions in virtual currencies to an end to help tracking of terror groups’ funding. To foster this, the Commission published an action plan that will help reinforce the fight against terrorism financing yesterday. It outlined information on how criminals are looking for new ways quickly that provide lower detection risk of moving their money.

There is no evidence in the plan that points out to finance terrorism being financed by virtual currencies. However, the Commission is certain that there is a possibility and feels that it is in a position to contemplate regulation as one of the continuing efforts to bring terror attacks to an end.

The plan requires the platforms that deal with virtual currency exchange to operate under the capacity of the European Anti-money Laundering Directive so as to ensure that exchanges can reveal who accessed their services and when they were used. According to the action plan, the Commission will as well inspect whether it is viable to include wallet providers of virtual currency.

Bitcoinistas should not feel like they have been left out by the EC since the action plan requires a re-think of how and when to reveal pre-loaded credit cards’ users, without minimising their utility. This is because many of these users are poor who find these cards useful instruments in financial matters because they work as credit cards without necessarily requiring the card holders to be credit-worthy. Consequently, a central register of bank accounts, as well as account holders, is required to be set up in the entire European Union member states.

Meticulous consideration of all exchanges between states and EU members that are known to be great points for money-laundering has not been left out in the action plan as well. About many government responses to situations raised by technologies, this issue remains of value, but pointless at the same time since virtual currencies create a virtue of privacy.

Bitcoin in its advice says, “To defend your privacy, there is need to utilise a new Bitcoin address whenever you accept a new payment. Also, you can make use of several wallets for various functions. In doing this, you will isolate all your exchanges and associating them with each other will not be possible. Those who send you money cannot view your other Bitcoin addresses and what you use them for. ”

Many virtual currency transactions are beyond EU’s reach in such a way that operators will find ways of cashing in cryptocurrencies within Europe. Cryptocurrencies do not allow terrorists to access funds.

British pound drops against the dollar

Amidst campaigns to determine the fate of Britain’s membership of the European Union, the pound has witnessed its sharpest decline in value since the 2008 financial crises creating a political basket of gold on both sides of the campaign.

In the four days that followed London’s Mayor, Boris Johnson, declare to support Britain’s exit from the EU; a defiance to the Prime Minister, David Cameron, the pound dropped 5cents to settle a seven-year low against the US dollar in all money exchange outlets.

The central question in the hearts of many people is whether they will be richer or poorer should Britain vote to exit. According to Cameron, Britain dropping out of the EU is like taking a leap in the dark. Meanwhile, HSBC and Goldman Sachs have cautioned that upon leaving the EU the pound could subsequently lose an extra fifth of its value.

Pro-Europeans are advising that the current hiccup in the currency is a sign of what could happen in the future should Britain decide to leave. However, the opposition has declared that voters would not give in to scaremongering carried out by independent banks that had warned of the repercussions of Britain withdrawing from the EU in the 1990’s.

According to Richard Trice, who is a supporter of the Leave.EU campaign, multinational banks are seeking to create volatility as it suits them in terms of profitability.

In the last week of February, most money exchange firms quoted the Sterling averaged at $1.3910 which was a seven-year low and heading for its worst weekly performance ever since 2009.

Following the poor performance towards the end of February, the Foreign Secretary, Philip Hammond, commented on the matter term it as a warning of the impact to come for leaving the EU. Hammond told parliament that voting to leave would create an uncertainty of the future which would further generate an adverse reaction in the financial markets.

According to the campaign supporting Britain to remain in the EU, the sterling pound could lose up to twenty percent more in value should the country decide to exit. In a nutshell, the exit would, therefore, mean that the prices of petrol, shopping, household gadgets and holidays would rise.

Britain’s relationship with its EU counterparts has been centralized on its currencies fate as well as the fact that London dominates the $5.3 trillion a day worldwide Forex market. Since the pound is one of the oldest currencies still in use, it has been an accepted symbol of Britain’s imposing might as well as a British exceptionalism.

The £ sign is utilized by the UK’s Independence Party as part of the emblem, and the Prime Minister David Cameron praised his European deal assuring it provided security for the currency. In a statement made by Cameron in regards to the deal, he said that not only had the deal permanently protected the pound and the country’s right to use it, but also ensured that Britain would not be discriminated. However, Cameron has not made any public statement regarding the fall of the sterling pound.

According to the deputy director of ‘Britain Stronger in Europe’ Lucy Thomas, the unpleasantness of the depreciating currency underlined the dangers of the country voting to leave the EU. Furthermore, the economic security of Britain would be put to risk not to mention that family finances would suffer a negative impact as well. Thomas also added that it was imperative for Britain to retain access to Europe’s 500 million customer market; just the possibility of leaving the EU has sparked a depreciation of the pound.

According to the CEO of Merlin Entertainment, Nick Varney, a weak pound would have a good effect on the British industry because it would be good for exports as well as tourism. He also added that should Britain make an exit, and the pound falls further in value, it didn’t strike him as an adverse outcome but rather a good one.

Is it now time to buy your holiday cash

Following the plummeting value of the pound, holiday makers are flooding money exchange outlets to stockpiling Euros for their holiday money amid fears of further devaluation of the pound. The possibility of Britain pulling out of the European Union has lead to a decrease in the purchasing power of the pound in other countries.

As a result, currency brokers such as Asda Money and Hifx have received overwhelming orders to supply holiday cash to families that are speculating the possibility of costs rising before Easter or summer breaks.

In comparison to the end of February 2015, 43% more Euros got exchanged by Britain’s largest currency seller, The Post Office, in the last few weeks alone. According to The Post Office, it has been selling twice the average amount of Euros for the month of March.

According to Darren Kilner, from FairFX, the past weeks have been busier than usual as customers are concerned that the EU referendum might have an impact on their holiday plans.

Just a few days ago, the Sterling pound dipped against the dollar to its lowest point since the 2009 financial crisis. One year ago, one pound exchanged for $1.51, but the devaluation has brought the exchange rate down to $1.35 per pound.

To the Euro, the pound has depreciated by 9%, and it is now trading at £1 for €1.23; a drop from €1.40 in July last year with experts predicting the collapse of the currency as the EU referendum takes place on June 23.

HSBC estimated the pound could fall further by 20% should Britain vote to leave the EU. From another point of view, USB says the pound could eventually equalize with Euro in terms of value. According to Panmure Gordon stock brokerage’s financial commentator David Buik, talk of the pound falling to a point of parity with the Euro is a bit extreme; however, it is possible that an exchange rate of €1.15 will be reached. He further added that he expected the pound to experience a sharp rise in the future.

According to a panel of neutral experts, it is advisable to visit a money exchange and buy some of your holiday money at the moment.

According to Justin Urquhart, founder of 7 Investment Management, the uncertainty of the British currency will continue to worsen until the countries stand in the EU referendum id established. He added that since it is not possible to know which way a currency will go, it would be advisable to get at least half of your holiday money now. He further stated that he could not see why the pound should gain value.

David Black, the founder of DJB Research; a financial research firm, says the currency’s exchange rate is going to fluctuate in the coming months and advises holidaymakers to estimate how much they are willing to spend and get at least half of the money now.

However, the director of Wealth Club investments, Ben Yearsley advises that should Britain gesture it wants to leave the EU the pound could further depreciate with the reverse also being the case. Thus, he does not rush to get the holiday money just yet.

Man steals £40,000 from Bureau-de-change

If you thought the era of brazen, out-in-the-open robbery was a thing of the past, think again. Recently, it was reported that a con man stole £40,000 from the safe of a supermarket in Trafford Park, Greater Manchester and simply walked out of the store without being noticed. This shocking act of theft was committed with skill and a highly refined sense of timing, ac-cording to sources. When asked to describe the robbery, an informed representative stated, “…He apparently wore a glove, knew the code for the safe, punched it in and was able to empty it. At one point a senior member of the Asda staff walked past while he was in the ki-osk and even spoke to him, but he just kept up the pretense as cool as you like.”

So, who was this man, and how was he able to successfully pull off what should have been an incredibly difficult task? The fact that the individual’s identity and whereabouts are still unknown is bad enough, and yet, perhaps even more troubling is the fact that no explanation currently exists as to how he knew the code for the safe within the bureau de change.

Whether or not this suspect will be caught is, of course, important, but this story also provides us with a far more interesting revelation, that being the idea that many of our preconceptions regarding the security and, ultimately, legitimacy of neighborhood bureau de change locations are, perhaps, incorrect. Given the fact that the world of currency exchange has recently been rocked by allegations of counterfeit currency selling in the UK in a separate, unrelated incident, many individuals have begun to ask themselves whether or not their desire to exchange large sums of money for international travel or business at their local ex-change venue is, indeed, the right idea.

This is not to say, of course, that sweeping reform or oversight is needed, but rather that specific problems have emerged in recent months that do need to be addressed by those in a position to remedy them. In time, such direct action will help ensure that the future of cur-rency exchange is not fraught with underhanded, illegitimate dealings and accusations of illegal behavior.

More information about this specific act of theft is likely to be provided in upcoming weeks as police continue their search for the culprit in question.

Euro to Dollar conversion rate declining

As could probably expected given the tumultuous nature of international politics and, perhaps more importantly, the global economy, the fx markets have experienced quite a shakeup over this past month. Although many of us would probably enjoy seeing some degree of stabilisation in the near future, the unfortunate truth remains that many ongoing issues are slowly reaching their apex in coming months (think Brexit, for starters). But, before we continue on what may happen in the future, let’s take a moment to discuss recent shifts in Euro to Dollar conversion, as these actions provide us with a decent context to predict future swings.

Experts consider a recent dip in the noted University of Michigan confidence index to have sparked a brief rally in an otherwise gloomy Euro Dollar slide. While the USD has fallen slightly, the Euro has been given an opportunity to gather the forces needed to initiate a much needed rally. Unfortunately, a host of dismal economic data being recently reported out of the Eurozone has made it somewhat difficult for the Euro to gain traction. According to recent reports, a surprisingly painful contraction in the EU’s trade surplus earlier this year (weighing it at just about 2.6 billion Euros) has proven to be a serious impediment for the Euro Dollar. Combined with the fact that inflation is occurring at a much faster rate than previously thought, the EUR has little positive news to pin a rally on.

In fact, even a spate of negative news out of the US is not providing a true foundation for upward momentum within the EUR. Consumer price date in the United States is at a depressingly low level, which would, historically, provided a valuable ‘bump’ for the EUR – this time around, however, no surge occurred. Likewise, statements from the Fed regarding squeamish monetary policy have almost always paved the way for EUR gains…except now. Suffice to say, it seems larger issues may be on hand if the Euro Dollar cannot find a boost in these historically rich offerings out of the United States. That being said, it is also important to note that international news outside of the US / EU domestic economy can also affect currency prices, and this scenario is no exception to the rule. China has recently announced a higher than expected growth percentages and a substantial boost of exports, news which was received warmly in the US and helped yet again strengthen the USD against the EUR.

What with all of the tumult in the EU regarding a potential Brexit, it is, perhaps, more easy to understand why traditional indicators are not yielding traditional results. The implications of such an observation are, however, troubling in their own right. With a break from history and, thus, historical trends, comes a journey into proverbially ‘uncharted waters’. There is little that analysis can offer when proven indicators do not yield proven results. Of course, this situation could change at a minute’s notice, or perhaps when the US releases their next round of economic reports. Until then, however, it will be quite interesting to observe how the Euro dollar withstands a seemingly unending stream of bad news spilling out of the European press. Sentiment, of course, plays a huge role in both traditional stock exchanges and the fx markets alike. With that in mind, it seems quite reasonable to assume that low morale could easily attribute to low value. Experts advise investors to watch closely for tests of support in the 1.230/20 region, as a break here may signal larger losses in the near future.

Category: Money Exchange