{"id":6157,"date":"2022-07-30T12:03:36","date_gmt":"2022-07-30T08:03:36","guid":{"rendered":"http:\/\/gccexchange.com\/blog\/?p=6157"},"modified":"2022-07-30T12:04:14","modified_gmt":"2022-07-30T08:04:14","slug":"how-do-i-know-whats-the-best-time-to-make-a-transfer-abroad","status":"publish","type":"post","link":"https:\/\/gccexchange.com\/blog\/how-do-i-know-whats-the-best-time-to-make-a-transfer-abroad\/","title":{"rendered":"How Do I Know What’s The Best Time To Make a Transfer Abroad"},"content":{"rendered":"\n

You may have heard that the EU\u2019s single currency the Euro is currently tracking against the US dollar at an all-time low.\u00a0 The exchange rates<\/a> between the dollar and the euro has drawn a lot of focus onto global foreign exchange (forex) markets which have seen some unusual activity for some time now.<\/p>\n\n\n\n

In\nthis post we are going to take a closer look at forex markets generally, how\ncurrencies move, and what the implications are for businesses and travelers. We\nwill share some insights into how to make currency predictions, and how to lock\nin the best exchange rates or best currency rates.<\/p>\n\n\n\n

\"Best<\/figure>\n\n\n\n

How Currencies Move<\/h3>\n\n\n\n

While global currency exchange\nrates have remained relatively stable for some years now ( at least since the last great upsets of 2007\/2008)<\/em>, they are by\nno means fixed. Rather, a nation’s currency can gain or lose value against\nother currencies depending on a wide number of factors including how that\nnation is currently fairing politically and economically. For example, the\nBritish Pound saw a bit of a decline following the result of the Brexit\nreferendum in 2016, and then the Russian Rouble has seen some pretty wild\nfluctuations over the last decade reflecting the country’s tempestuous\nrelationship with the rest of the world.<\/p>\n\n\n\n

Coming back to the Euro, the once mighty currency is currently experiencing a bit of a freefall<\/a>. It is currency trading at something nearing 1 to 1 with the dollar (meaning \u20ac1 – $1) whereas just 12 months ago the \u201cnormal\u201d exchange rate was around 1.20 (meaning that \u20ac1.20 – $1). The reasons for this are a mixture of political instability in the Eurozone, inflation coupled with low interest rates in the EU, and of course the war in Ukraine.<\/p>\n\n\n\n

As for the consequences of this,\nwell it is good news for American businesses who buy goods from Europe, and\nexcellent news for American travellers looking to visit Europe as their trip is\nnow effectively 15% – 20% cheaper than it would otherwise have been. On the\nother hand, Europeans will find visiting the states to be rather expensive\nright now and of course, any American companies exporting to Europe may find\nthat their customers can no longer afford their goods.<\/p>\n\n\n\n

How To Make Currency Predictions<\/h3>\n\n\n\n

Recognizing\ncurrency changes in retrospect is all good and well, but many businesses and\neven travelers know that there is an advantage to be gained from successfully anticipating\nchanges in currency exchange rates and capitalizing on them. But is it really\npossible to make currency predictions?<\/p>\n\n\n\n

Well\nthe answer is yes – kind of. Although there is no foolproof system for making\ncurrency predictions we will look at some of the different analytical styles\nand methods used in order to make predictions;<\/p>\n\n\n\n

Fundamental analysis<\/strong><\/a> basically means paying attention to global events and governmental monetary policy in order to try and predict exchange rates. A few key drivers that inform a fundamental analysis of a currency include the host country’s economic growth, inflation, employment rates, interest rates and geopolitical factors.<\/p>\n\n\n\n

Technical analysis<\/strong> on the other hand is less concerned with the\n\u201cwhy\u201d and entails studying the markets detached from any external reality and\nsimply trying to spot upward, downward or sideways trends based on past data.\nThere are a number of tools that can be used in a technical analysis including\nmoving averages which seeks to \u2018smooth out\u2019 historic price data, calculating\nthe average exchange rate of a given time period.<\/p>\n\n\n\n

Purchasing Power Parity (PPP) <\/strong>is a method that compares the price of consumer products\nacross different countries. For example if a Big Mac costs \u00a31 in the UK and $1\nin the US, then the exchange rate should\nb<\/em>e 1:1 using PPP.  However, if the\nexchange was 1:2 then that would be considered an anomaly and the prediction\nwould be that the rate would soon correct itself.<\/p>\n\n\n\n

Interest Rate Parity (IRP)<\/strong> takes the same approach as PPP but uses\nfinancial asset yields (adjusted for interest rates) instead of consumer items.\nSimilarly, the Real Interest Rates (RIR)<\/strong>\napproach is based on the idea that currencies from a nation with high interest\nrates will appreciate in value against currencies from nations with lower\ninterest rates on the grounds that high rates attract foreign investment.<\/p>\n\n\n\n

The Payment Theory and Asset\nMarket <\/strong>Models are methods that focus on how the flow of trade, in and out,\nof a country impacts the value of its currency. The underlying presumption\nbehind this theory is that a country’s currency will depreciate if it imports\nmore goods and services than it exports, and vice-versa. This method can be\nvery useful as it directly measures one country’s imports against another’s and\nis therefore a powerful method for comparing their respective currencies.<\/p>\n\n\n\n

Of\ncourse, it is possible to try to combine any number of these methods although\nthere is frequent discord between them. Ley people hoping to predict currency\nrates may also wish to follow reputable publications who report on matters of\nglobal business such as The Financial Times and the Wall Street Journal.<\/p>\n\n\n\n

Getting The Best Exchange Rates<\/h3>\n\n\n\n

Anybody looking to secure\nthemselves the best exchange rate needs to know how to anticipate changes and\nhow to act on them.<\/p>\n\n\n\n

For example, a US based business\nor citizen who thinks they will need Euros in the near to intermediate future,\nmay wish to seriously consider buying the Euro\u2019s now regardless of whether or\nnot they need them at this exact time.<\/p>\n\n\n\n

This is simply because the Euro\nrate is at a historical low and is unlikely to fall any further. The primary\nreason for the parity between the Dollar and the Euro is the interest rate\ndifferential; the European Central Bank has been reluctant to raise interest\nrates in the Eurozone, but it seems likely that they will soon have to act and\ndoing so will probably curb the Euro\u2019s descent. On the other hand, a worsening\nof the war in Ukraine may result in further losses to the Euro if the conflict\nspills over into the Eurozone.<\/p>\n\n\n\n

Getting the best exchange rates\nis also about being ready to act when the rates are optimal. Opening a multi\ncurrency account or an account with a forex trader allows the buyer to purchase\na currency when the rate is good and then hold onto the foriegn currency until\nit is needed.<\/p>\n\n\n\n

Final Thoughts on\nCurrency Predictions & The Best Currency Rates<\/h3>\n\n\n\n

In summary, there is no foolproof\nguide on how to make currency predictions. Rather\nit is a case of  studying how currencies\nmove, paying attention to world events & global markets, and then being\nready to take a bit of a gamble. <\/p>\n\n\n\n

And remember, the key to locking in the best exchange rates is also a matter of acting when the markets are favourable.\u00a0 The best currency rates one day may turn into something less attractive the next, so waiting too long can prove to be a mistake. <\/p>\n\n\n\n