THE summer holidays are upon us and many Brits are off to the Continent – but buying euros can be tricky given the ever-moving exchange rate.
Here is our guide to the current state of the market, and how to get the best price when you swap your cash.
What is today’s pound to euro exchange rate?
Following a rise earlier in the week, the pound was trading at around €1.11 this morning as it continues to decline.
But actual rates for holidaymakers are significantly lower.
Sterling has plunged against the euro and dollar in recent weeks as traders bet against the UK currency.
It comes after Bank of England governor Mark Carney warned of an “uncomfortably high” risk of a disorderly Brexit and said banks must prepare for a recession.
International trade secretary also said there is a 60-40 chance of “no deal” because of stubbornness in Brussels.
A weaker pound is better for British exports – but imports will cost more, potentially driving up inflation.
It also means your money doesn’t stretch as far when going abroad on holiday.
The exchange rate had remained relatively stable for months following a more volatile period earlier in 2018.
Sterling dipped below €1.12 on March 7 and then reached almost €1.16 on April 17.
Last August the rate briefly plunged under €1.08, the lowest for nearly a decade, but it quickly recovered.
Before the EU referendum in June 2016 a pound was trading for around €1.30. Sterling fell around 15 per cent after the result.
The highest rate in recent years was €1.42 in November 2015.
What affects the exchange rate?
Foreign exchange (forex) markets allow currencies to be bought and sold around the world.
They are necessary for international commerce but are also opportunities for traders to make a profit by effectively gambling on whether rates go up or down.
As in any market, rates are determined by the price that buyers and sellers are willing to accept.
If more people are buying than selling the price will go up, and vice versa.
Traders’ confidence in a country’s economic health is the biggest factor shaping forex markets.
Reports and forecasts on GDP growth, inflation, employment, retail sales and manufacturing can prompt traders to buy or sell a country’s currency.
Other factors that sway forex markets include interest rate decisions by central banks (such as the Bank of England), and news such as the signing of a trade deal or a natural disaster.
Movements in global capital markets, bond markets and stock markets can also influence forex trading.
Banks and money changers who sell holiday cash broadly follow foreign exchange markets in the rates they offer the public.
The buy and sell price for each currency is usually a few percentage points either side of the “true” rate so they can make a profit even if there is no commission.
How can I get the best currency rates?
WE spoke with Hannah Maundrell, editor-in-chief at money.co.uk to find out how you can guarantee the best rate when you go on holiday
- Don’t buy cash at the airport – you’ll always be able to beat the rate with a bit of forward planning
- Compare travel money companies online – Factor in delivery costs and choose the option that gives you the most cash to spend on holiday. If you’ve left it until the last minute order online for airport collection so you get the best of both worlds.
- Use comparison tools – MoneySavingExpert’s TravelMoneyMax enables you to compare pick-up and pre-order rates.
- Don’t pay for travel money with a credit card – it’s likely you’ll be charged a cash withdrawal fee which adds to the cost.
- Top up a prepaid card to lock in your rate now – Choose your card and read the T&Cs carefully as some apply hefty fees. WeSwap, FairFX and Caxton FX are all worth checking out.
- Always choose to pay in the local currency rather than sterling – This will help you avoid sneaky exchange fees
Where is the best place to get euros?
The best rates can often be found at specialist online outlets, such as Travelex, which will deliver cash directly to your home.
Travellers can use comparison sites, like MoneySavingExpert’s TravelMoneyMax, to find the best rate.
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If you order in advance and pick up the cash then you’ll most likely get a better rate than if you walk into a bureau de change.
You can always buy last-minute currency at the airport or withdraw cash at your destination, but it’s almost always cheaper to buy before you go.