Brexit is fast approaching, with the Conservative government working at speed to meet the January 31 departure deadline. Although little is known about whether a deal will actually be solidified before the deadline, it is likely the departure will have some impact on the exchange rate.
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As January is a peak time for holiday bookings, thanks to an array of seat sales and holiday package discounts, many Britons are gearing up for their 2020 holidays.
However, it seems travellers heading to Europe could be getting less for their money as a result of the political turbulence.
International Money Expert Ian Stafford-Taylor of Equals (formerly known as FairFX) explained that the pound is currently 10 percent lower than it was one the day of the EU referendum in June 2016.
“Brits heading to Eurozone countries will now get £114 worth of euros less for every £1,000 exchanged than they would have three and a half years ago,” he said
“The uncertainty that has shrouded Brexit negotiations including numerous MP votes, a change in Prime Minister, a general election, deadline extensions and everything in between have all contributed to the instability of the pound.
“While it has moved in both directions, it has failed to return to its pre-referendum rates against the euro and holidaymakers today are still worse off as a result.”
With that said, there’s no sure answer as to whether things will always be this way.
In recent months the pound has reacted positively to the promise of a deal being struck between the UK government and the EU and subsequently plummeted when the risk of a no-deal has heightened.
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Ian continues: “Brexit is an unprecedented event so we’re entering unchartered territory for the pound.
“This makes it difficult to predict exactly what will happen, but whether or not the pound can recover will largely depend on the trade deals the UK strikes with other countries after leaving the EU.”
In recent weeks Boris Johnson has seemed to remain positive that a deal with member nations is possible, though the terms and conditions of such a deal are yet to be heard.
Ian concludes that even if the pound does recover to pre-referendum levels “we need to stay prepared for more turbulence as we continue to negotiate relationships with both the EU and other nations.”
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Unfortunately, it seems holidaymakers have already been hit by the uncertainty of Brexit.
“Equals found that if holidaymakers bought currency when rates were at their lowest in the last 12 months compared to when rates were at their highest, the nation would have collectively lost £3.97 billion[i] (that’s around €154 each for every £1,100 exchanged) just by exchanging currency on the ‘wrong’ day,” explained Ian.
Furthermore, the travel money experts also discovered that Britons were returning home with approximately £177 worth of leftover currency.
“The safest way to guarantee getting an exchange rate you’re happy with is to lock-in the rate on a prepaid card when the pound is doing well. It also means you avoid losing money when you return from your trip and have to change any leftover cash back into pounds if the exchange rate has worsened.”
Ian adds:“If it’s on a prepaid card that’s fine, you can save it for future trips or switch to a different currency, but if that’s in cash, you’re left at the mercy of buy-back rates which are rarely favourable.
While unpredictability is a key theme of the ongoing Brexit debacle, keeping an eye on currency changes and relevant news updates could help ensure you get the most bang for your buck.
“Brexit is new territory, and as we move closer towards the date when the UK officially leaves the EU, there is likely to be more turbulence for the pound,” says Ian.
“As the pound fluctuates keeping an eye on currency rates from the time you book your trip will help you get more by exchanging currency when the pound is strongest.
“With half term just over a month away, travellers should buy currency as soon as they see a rate they feel happy with.
“The most important thing half term travellers can do is to avoid leaving their currency purchase to the last minute.
“Once they are at the airport they’ll be at the mercy of high margins and will lose out on holiday money thanks to high exchange rate margins”.
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