By James Lynn, co-founder of Currensea and originally featured on InsuranceWire.
With the ongoing Covid-19 crisis deepening across Europe, the unified currency remains under some considerable pressure. With restrictions and lockdowns sweeping across Europe as the second wave of the pandemic takes its toll, the global pandemic is not necessarily the biggest influence on the pound to the euro exchange rate as we find ourselves amongst a politically ambiguous back-drop.
If the global pandemic has taught us anything, it’s that the only certainty is uncertainty. With the constant changes, it is impossible to predict what to expect when it comes to foreign exchange and the impact the global pandemic will have on the Sterling. What we can look at, however, is the several factors that have a great deal of influence and how this may affect the euro conversion rate.
The biggest item on the UK news agenda in recent years and likely the biggest influence on the pound to the euro exchange rate is Brexit. Following the Brexit vote, the pound lost value overnight against almost all currencies. An average traveller will have seen their pound buy roughly 13% fewer euros since that time and almost 18% less in the middle of 2019 with turmoil around Brexit and the UK government.
Conversely, recent progress on a possible Brexit deal has buoyed the Sterling. These gains could, however, be overdone and any further upside could be limited in the short-term with the UK facing similar pandemic issues as its EU counterparts across the Channel.
Couple this with the knife-edge US election result expected next week and the only thing we know for certain is that things may well look very different in the near future.
My advice for those that need to transact internationally, would be to lock in any favourable rates rather than seeking any further improvement in the current climate. Equally, those still looking to travel should consider their cash flow rather than trying to speculate market movements when purchasing their travel money.
Travel cards will generally provide you with the best rate, making them a much better alternative to cash. This will perhaps mean that another impact of coronavirus will see the diffusion of travellers purchasing and carrying cash on their holidays. Whilst a safety precaution first and foremost, it also allows consumers to seek out the best foreign exchange rates in the market. It is always advised that you should opt for a travel card that offers complete transparency in regards to its fees and charges.
There is already much debate about the practicalities of travelling and spending in Europe post-Brexit and it is our ambition at Currensea to alleviate this and provide consumers with transparency around conversion rates and fees as far as possible, no matter how the Forex market moves.
While it is impossible to predict how foreign exchange rates may look in the future, one thing we do know for certain is that each country is facing its own battle with the impact of coronavirus on its currency. While the pound may take a hit, our foreign counterparts across the Channel will also see a significant impact.