Exchange your holiday currency into euros without delay, due to current market conditions. However, postpone purchasing US dollars under the ongoing Trump tariff turbulence.
Swinging currency rates may leave tourists lighter in the wallet if they don't time their exchange right. This year, exchange rate volatility is sky-high due to US trade policies stirring up global financial markets.
So, when should you buy euros if you're planning a trip to Europe? Tony Redondo, founder of Cosmos Currency Exchange, advises buying them as soon as possible if you're setting off within the next month. The euro has been fortifying against the pound lately, so each pound won't stretch as far – and there's more reinforcement on the way.
The euro's been boosted by US tariff policy, which has made investors worried about the dollar. Instead, they're funneling their money into European investments, seen as safer bets in uncertain times. That's pushed up the euro's value – not only against the dollar but also sterling.
The UK's economic outlook isn't rosy, either. Last week saw a sharp drop in the pound's value following unexpectedly gloomy official data, which revealed that the economy shrank by 0.3% in April. This fueled speculation that the Bank of England might slash interest rates as early as August, and that's bad news for the pound.
Mr. Redondo says, "Until last week, the view in the markets was for the Bank of England to cut interest rates maybe one more time in 2025. This week has changed that, with two cuts now forecast."
Heading to Disney World during the school holidays? You're in luck, as you can currently snag $41 more for £500 compared to last June. The pound's weakness against the US dollar is due to President Trump's trade policy and growing expectations that the Federal Reserve will slash US interest rates.
Simon Phillips, at travel money firm No 1 Currency, suggests waiting to buy dollars until closer to your travel date, especially since Mr. Trump has floated the idea of extending the 90-day tariff pause. Phillips says, "If we keep getting tariff extensions and volatility, the pound will perform well against the dollar."
To dodge the fluctuations, consider a mix of cash and cards. Pre-paid cards can help you lock in an exchange rate ahead of time, like the Wise card, which costs £7 to order. Choose a card with no foreign transaction fees, like Starling or First Direct. When using cards, remember that cash is still king in many parts of Europe. Always consider purchasing some currency before arriving at the airport to avoid paying premium rates.
[1] Bank of America Net Revenue Projection for 2020: https://www.bankofamerica.com/institutional-investor/research-insights/surveys-research/us-economics-research/revenue-performance-indices-projection-revenue-growth/[2] US-China Trade War Impact on Currency Markets: https://www.investopedia.com/terms/u/us-china-trade-war.asp[3] Federal Reserve Rate Cuts and Exchange Rates: https://www.investopedia.com/terms/f/federal-reserve.asp#:~:text=The%20Federal%20Reserve%20controls%20the,currency%20itself%20against%20other%20currencies[4] Exchange Rate Volatility and COVID-19: https://www.imf.org/en/Publications/EMDE-Policy-Paper/Issues/2020/03/26/Exchange-Rate-Volatility-and-COVID-19-47869[5] Dollar Weakness and European Currencies: https://www.fxstreet.com/currency/usd
- To lessen the impact of fluctuating currency rates on personal-finance, particularly when planning a travel to Europe, it's advisable to buy euros as early as possible if a journey is planned within the next month, as suggested by Tony Redondo of Cosmos Currency Exchange, given the euro's strengthening against the pound.
- In light of the US trade policies causing exchange rate volatility andglobal financial market uncertainty, some investors are opting to invest in mortgages and other European investments deemed safer bets, which has led to a boost in the euro's value against the dollar and sterling, making personal-finance planning even more crucial.
- When visiting Disney World during school holidays, tourists could benefit from current exchange rates favoring the pound against the US dollar, providing an extra $41 for every £500 spent, though it might be more advantageous to wait and buy dollars closer to the travel date, as per advice from Simon Phillips of travel money firm No 1 Currency, to account for potential tariff extensions and ongoing volatility in the currency markets.
