The United States of America is a hugely diverse and beautiful country, and it’s easy to see why so many Brits choose to travel there. With some of the most famous cities in the world, extensive National Parks and exciting cultural attractions dotted all over the land, the US offers something for everyone in the family. What’s more, there’s no language barrier, which can make it easier to get the most from your break away.
If you’re planning to visit the US this year, it’s likely that you’ve been watching the pound to dollar exchange rate with interest. Many different economic influences, such as Brexit, high inflation, and political concerns, have affected the exchange rate in recent months, making it difficult to know precisely when to get the most from your holiday spending money.
Working out the best time to exchange your hard-earned pounds into dollars can mean you get a lot more for your money – in some cases the difference can add up to hundreds of extra dollars, depending on how much you’re looking to exchange. For this reason, it’s obviously important to keep an eye on what is happening to these rates to prevent you from missing out and feeling ‘short changed’.
The GBP – USD exchange rate: a recent history
Over the past 12 months, the pound has been strengthening against the dollar in general, with the odd fluctuation here and there, as is normal and expected for currencies. When you compare the exchange rate around a year ago to the exchange rate today, the difference is certainly not to be sniffed at.
As an example, if you were to exchange £500 to US dollars on 28th February 2017, you would have got $615 in return. Exchanging the same amount on 28th February 2018 would have resulted in you receiving $685. This $70 difference could make a big difference to your holiday budget, allowing you to afford an extra day out, or at least covering meals for a day or two.
While this all sounds great, it’s worth noting that the exchange rate is always fluctuating, and many are wondering how it will develop over the coming months.
On 2nd February 2018 the pound hit a high against the dollar not seen since before the Brexit referendum, when the value of the pound dropped sharply across world markets. If you were to exchange £500 into dollars on 2nd February 2018, you would have received a favourable $710. However, over the past month, the price of the dollar has wavered and many are wondering if the exchange rate is due to change course and begin dipping once again.
The state of the pound
This fall in the value of the pound is happening for numerous reasons, but one of the stand-out explanations is the uncertainty surrounding Brexit. As the UK is yet to strike a Brexit deal with the EU, concerns surrounding the economy and political stability of the country have been driving down the value of the pound. It has, however, more or less bounced back each time there has been an issue so there is some confidence that the latest dip is not due to last.
As with any stock market asset, however, there is very little certainty that what the experts say will necessarily happen. Others are concerned that the pound may find it hard to recover if a deal cannot be struck before the deadline this time next year, in March 2019. The UK has around 6 months to come to agreements on all parts of the deal so that this deadline can be met, so any perceived delay on this can send the markets into turmoil and the value of the pound plummeting.
The state of the dollar
The dollar has been weakening against the pound for some time, and much of this is a result of America’s own political uncertainty along with high inflation. However, in recent days it seems to have rallied, bringing down the exchange rate and causing positive expectations.
This upturn seems to be the result of a speech made by the new governor of the Federal Reserve, Jerome Powell, who was positive about the US economy and talked about raising interest rates. This often leads to increased currency strength, which is buoying up hopes for the near future of the US dollar. These very recent gains made by the dollar is raising eyebrows among analysts; is this a turning point, or will it simply weaken again?
Should I buy US dollars now?
Of course, there is no way to correctly predict what the stock markets will do, or what will happen in the world to affect the exchange rate on a day-to-day basis. When looking back on the exchange rates of days gone by, it’s easy to see how it can take more luck than judgement to come out with the best rate possible.
This being said, the general trend of the pound strengthening against the dollar may well continue, even though the opposite has been happening in recent days. If the UK is able to make positive steps towards a Brexit deal and the US reigns in its defecit, there’s no reason why the pound can’t be very strong against the dollar and continue to make gains. However, the chances of the US Government giving up their big spending plans, and the UK suddenly coming to a Brexit agreement which instils confidence in the markets may seem slim.
While there is so much uncertainty and so many aspects to consider, exchanging your pounds for dollars now may be a sensible option. You’ll still gain more than you would have last year, and you could be avoiding further dips in both currencies as we move to the end of the financial year and economic challenges are met.
You can find preferential rates for US dollars (and any other foreign currency you require) at H&T stores across the UK. We offer 0% commission, as well as currency buyback should you have some left over after your trip. Remember to plan ahead, as buying foreign currency at the airport is usually the most expensive, and there’s no way to avoid a terrible rate should it dip on your day of departure. If you have any questions about foreign currency and how to exchange your money, please don’t hesitate to contact us.