Market Orders can help maximise value on currency transactions. GBP/EUR Case Study

 

Jordan A Smith

Director/Founder at AlbaFX

A reason to consider using Market Orders to maximise the value in currency transactions. Having had a number of clients successfully trigger their orders on last weeks currency swings, I thought it worth sharing.

 

GBP/EUR levels over the past week have been particularly volatile as demonstrated by the graph. With many companies transacting on SPOT, this is an ideal opportunity to outline why the increasingly popular Market Order tool can work very well to ensure your business maximises the value when transacting on SPOT or even Forward Contract.

How many times do you look at the exchange rate achieved on SPOT transactions or when committing to a Forward Contract and feel that if you transacted yesterday or earlier this morning that you would have had a better rate?

A market order is a set trigger level agreed between you and your specialist dealer to transact -buy or sell, that is locked on our system should the market move to that level. What this does is assist business owners and Finance Directors who have a desired rate to achieve in a time-frame but do not have time to monitor the market every minute of the day. The rate of course may never be reached in the time-frame but in that case the trade would be execute on due date as per the normal process.

 

Last week until Thursday lunchtime ECB announcement, the levels had been reasonably undramatic in the 1.29/1.28 mainly but immediately after the announcement the market reacted significantly, firstly with a spike through 1.30 and then fell to 1.27s within couple of hours. Swings of over 3 cents. This allowed those clients who are sending € payments with a 1.30 target rate to benefit from achieving this, as the SPOT and Forward orders are automatically captured. This also allowed those selling € back to £ with desired levels of 1.27s to also benefit as it automatically was captured. What this means in real terms is the  difference between executing a 100k (£) trade at 1.28 and 1.30 is around£1,600.

 

In Short, this is simply an additional tool than can help businesses benefit from an upside in the right circumstances. Another way to work smarter on currency management and leverage the tools and products that are available to your advantage. Something that if not considered before is well worth a conversation.......

 

For any Market Order or Currency Management questions or conversations please get in touch with us at AlbaFX www.albafx.co.uk info@albafx.co.uk and will be delighted to chat

£ Weakness hits Importers heavy- Be smarter to protect your Business

Today, many UK  SME corporate importers are facing challenging times due to exchange rate fluctuations driving the cost of importing goods in USD up substantially.

Ok, so importers have seen the cost of a USDollar increase by around 20% in the past 20mnths and in the past few weeks has moved well below the all important 1.5000 threshold.  Many owners, FDs and MDs have traditionally used 1.5000 as a floor or budget rate when pricing and negotiating contracts. This has sparked alarm and has been widely publicised.

We are not only assisting our current clients through these challenges but are now extending our services to any business directors affected who would appreciate a conversation or meet with one of our specialist team. 

The stark reality is that whilst many company owners/leaders will see profit margins reduced due to this,  they will consider re-pricing, re-negotiate, re- sourcing goods. These are all best practices when faced with these current challenges to protect your business.

However, in actual fact , what we have found through over 10 years experience, is that the smartest first step is what most continue to ignore or dismiss. This should be to contact a trusted Global Payments specialistand have a real conversation to take stock and understand your company FX position and circumstances in full.  This will be the start of a more strategic longer term view and attitude which will serve your business well going forward and be beneficial on many levels.

By doing this you have access to discuss what products and services are available to make things more cost effective, streamlined and risk adverse going forward.  Basically put,  fitting a solution around your finance function rather than the other way about that most seem to accept with a default bank facility.  Sure, minimising immediate pain through sharper rates, on-line payment platform, quicker delivery, easier processing is all good and well and a start point.  Most important though, is going forward with some form plan and efficient system that compliments your business as it deserves.