Home » How To Navigate Brexit When Sending Money Abroad

How To Navigate Brexit When Sending Money Abroad

Brexit is in and out of the headlines and the pound has been swinging up and down like a yo-yo as a result. By late January the pound to US dollar (GBP/USD) exchange rate had broken through some key psychological barriers and was trending in the region of 1.43. However, Brexit struck again and papers reported Theresa May’s situation becoming more unstable amid a split in the Conservative Party and leaked reports showed Britain will be far worse off after the divorce. The pound sank to around 1.39 in just a few trading sessions during the final few days of the month, before bouncing higher again.These volatile times have become unnerving for many who want to send large sums of money overseas; after all, how do you know when a good time to trade will be? When are the key Brexit dates? What progress is being made? And how will all of this affect the pound? To help you out, we’re going to discuss Brexit and how things are progressing, as well as sharing some tips on how to move your money abroad amid so much market volatility.

Why It's Important

The first thing to understand is how much difference Brexit and currency swings can make to your funds. If you were interested in buying US dollars and the interbank rate dropped from 1.43 to 1.39 in the space of a few days, a £300,000 transfer could give you $429,000 in the first instance, and only $417,000 in the second. Currency movements can make the difference of thousands of pounds, which is extra money in your pocket. And who doesn’t want to start their life abroad as comfortably as possible?

Here are some tips to help you navigate Brexit to make the most of your overseas money transfer.

Understand The Politics

You might know that currencies can move on politics but do you know why? Brexit is a complicated issue, and the political implications are likely to create some drastic currency swings this year. Markets shy away from uncertainty as the fate of a country is thrown into question. Politics can have a huge impact on economic growth and how a country performs – all of which are of interest to investors as they can correlate into currency movements.

Get Our Best Articles Every Month!

Get our free moving abroad email course AND our top stories in your inbox every month

Unsubscribe any time. We respect your privacy - read our privacy policy.

Brexit Timeline

Getting your head around the Brexit timeline will give you some indication of the points at which sterling could be most vulnerable. A Brexit timeline is in place, but it’s important to remember that plenty can happen in between these dates:

• January – Brexit transition talks begin
• February – 23rd Brexit summit
• March – 22nd – 23rd Brexit trade talks begin
• June – 28th – 29th Brexit summit
• October – 18th – 19th Brexit summit
• March 29th, 2019 – Brexit day

The trade talks are likely to be a major influencer of sterling movement as so many businesses are eagerly anticipating the developments. For some companies, the trade deal could mark the difference between whether they remain in the UK or move operations abroad to reside in an EU country that has benefits such as access to the Single Market.

So far this year, Brexit optimism and disappointment has seen the pound rise and tumble before trade talks have even begun. Therefore, market perception on how Brexit may evolve could have a big influence on the exchange rate moving forward.

The Brexit Bill

So far, 2018 has seen the Brexit bill thrown up in the air as the Lords Constitutional Committee have said it’s ‘constitutionally unacceptable’ and said it would need substantial revisions. The committee said that converting EU laws into UK laws was a complex issue, as ‘in many areas the final shape of that law will depend on the outcome of the UK’s negotiations with the EU.’ The Lords also said that the bill, at present, gives ‘overly broad’ power to government ministers. Investors in the pound will be keen to see how the bill is amended and if there are any hold ups to talks as time goes on.

Another Referendum?

In recent weeks there have been calls for another referendum from a few different sources. One of the most interesting ones was former UKIP leader and pro-Brexit backer Nigel Farage. Farage’s name has been splashed around in the papers over the years as he’s been a strong advocate for the Leave campaign. However, the Lords debate in January saw a few members suggest another referendum would need to happen.

Lord Mandleson, who is the former Labour business secretary and European commissioner, stated that although he thought in 2016 when the referendum took place that the government had to see Brexit through, he now had doubts. Mandleson said: ‘I no longer believe this to be axiomatic. The government cannot behave as if it has a blank cheque to take Britain out of the EU in just about any vandalistic way it chooses. So a referendum on a new question about the future relationship may become unavoidable – although this is not something on which we should be voting at this stage.’

Another, Lord Rooker, said that another referendum should occur, arguing: ‘I want it [the Brexit bill] to go back to the Commons amended in a variety of areas, not least giving the people the choice to leave or remain based on the evidence of facts, not lies from a soapbox. The key is that the bill is amended in the interests of the whole nation, not a political tribe.’

There’s been a lot of debate surrounding the lead-up to the Brexit referendum and the claims made, perhaps most notably the red bus with the statement ‘We send the EU £350 million a week, let’s fund our NHS instead.’ This statement has been brought back into the spotlight recently with the NHS crisis making the headlines multiple times over the winter months. While things remain uncertain at the moment, the prospect of a second referendum on the possibility of remaining within the EU or voting on a Brexit deal, could create dramatic pound fluctuations. The result of such a huge event could either send sterling soaring or slumping.

A Leadership Battle

Things haven’t been great for Theresa May and there seem to be recurring rumours that a leadership battle could be on the cards. In January, The Times reported that a quarter of Tory donors wished Theresa May would step down and throughout the month there had been a noticeable weakening of her position. When asked if she’d quit, May responded: ‘I’m not a quitter’. Additionally, Theresa May’s had another embarrassment as a document leaked showing Britain would be worse off in every scenario after Brexit. It seems a split in the Tory party and growing discontent amongst financial backers since the disastrous snap election last year have become more prominent, and it feels as if Theresa May could be standing on shaky ground moving forwards.

However, one of the problems facing discontent Tories is replacing Theresa May; who would fill her role? There doesn’t seem to be any indication of who would replace her or what kind of Brexit they’d want to deliver. May herself has been urged a number of times by the EU to be clearer on what kind of Brexit Britain wants and has instead tried putting the ball in their court, asking them to submit ideas. Until there’s some clarity on the matter, May is likely to remain in her weakened position amid a backdrop of discontent grumblings.

Stay In The Know

Making informed decisions is key – speaking to an industry expert helps you to make smarter choices as they’ll be able to inform you of upcoming events which may impact your exchange rate. So, whether you want to swap your pounds for US dollars, South African rand, euros or any other currency, you need to be aware of the factors that can affect your chosen currency pair.

Be Aware Of Other Factors

Whilst Brexit can be a huge influence on sterling, it’s also worth being aware of other factors that might affect your exchange rate. Economic data and central bank decisions can also create currency fluctuations. At the moment, inflation is something markets are watching carefully as if it remains high, the Bank of England (BoE) may be inclined to increase interest rates. Additionally, growth figures are important for a currency, especially the pound post-Brexit vote. Some institutions have been pessimistic about British economic growth following the vote, but the UK economy has thrown out a few surprises since and shown better expansion than forecast.

Investors in the pound are also paying attention to comments from the Bank of England, in particular the Governor, Mark Carney. At the end of January, Carney spoke and boosted the pound – while he acknowledged that there’s still a lot of Brexit uncertainty, he suggested the bank’s focus was on inflation. He said: As slack in the economy has been taken out, we’ve moved into a more conventional area for monetary policy where the focus is increasingly on returning inflation sustainably to target over an appropriate horizon.’

Avoid Brexit Fluctuations And Plan Ahead

If you’re looking at buying a property abroad and the pound is performing well against your chosen currency, you can take advantage of the market movement by locking it in. This means if the rate drops suddenly, you’ll still be able to exchange your funds for the rate agreed. This can be incredibly useful when the exchange rate is volatile and you’re making a house purchase that might take several months to complete. For instance, if you looked at a property in Europe one month with a pound to euro (GBP/EUR) exchange rate of 1.15 your house might be within your budget. However, fast forward a few months when Brexit developments have heated up and you need to transfer the rest of your funds, and you may find that the exchange rate has fallen, making your property more expensive or even unaffordable.

Getting in touch with a currency broker as soon as possible can make a difference to your funds and give you more choices. FC Exchange assign you a dedicated currency expert who will guide you through the process of sending money abroad, and help you navigate the market amid Brexit volatility.

Latest Videos

Expat Focus Financial Update February 2024 #expat #expatlife

Expat Focus 28 February 2024 2:53 pm

This error message is only visible to WordPress admins

Important: No API Key Entered.

Many features are not available without adding an API Key. Please go to the YouTube Feeds settings page to add an API key after following these instructions.