Forex Weekly Round Up – 8 December 2014 – 12 December 2014

by Cas Majid

Here is our market summary for the week commencing 8 December 2014.

There was broadly positive news from the US, with the biggest payroll gain since 2011. Hiring increased across most industries leading the US economy to create the most jobs it had done in almost three years. The jobless rate was a six-year low of 5.8pc. However later in the week, the Dollar lost ground against the Pound after Federal Reserve disagreements over the budget surfaced.

China’s trade surplus hit a new high in November as the fall in prices of oil, iron ore and other commodities made it cheaper for China to import goods. China’s export continue to capture a growing share of worldwide markets. The General Administration of Customs announced China’s trade surplus was $54.47 billion, breaking the previous record which was $49.87 billion in August.

The UK trade balance figures showed that the trade deficit was at a seven-month low in October, as less oil was imported and exports were up. The trade deficit was £2 billion in October, down from £2.8 billion in September. The Office for National Statistics said exports rose by £200 million, including silver exports to India. Imports fell by £700 million, mainly caused by lower oil imports from non-EU countries.

Uptake of the EU’s low-rate loan program met market expectations. There were calls for the European Central Bank to do more to kick-start the region’s economy.

How To Take Advantage of Forward Contracts

by Cas Majid

In this week’s post I discuss forward contracts and how you can use them to your advantage.

What is a forward contract?

A forward contract is a contractual obligation to buy or sell a fixed amount of currency on a future date and at a predetermined exchange rate.

Forward contracts allow you to eliminate currency risk by agreeing an exchange rate into the future. For example, if the Dollar is weak against the Pound, you can agree to buy Dollars at an agreed rate into the future even if the Dollar becomes stronger. You are effectively buying Dollars today at yesterdays rate – something that could save you thousands.

You can setup delivery dates that are matched against your cash flow and provide price protection.

Next week I will discuss how to add to your bottom line using Forex trading.

What are Limit Orders

by Cas Majid

In this post I will discuss the advantages of a limit order.

You don’t have to buy or sell currency at the market rate. You can use a limit order to set parameters and let our broker make the trades for you.

A limit order is only executed if the price hits the limits set out in the order. Limit orders are very useful in fast-moving FX markets where prices can change rapidly. Rather than watching the market closely you can agree a limit order with one of our brokers and let them watch the market for you. This gives you more free time to work on other areas of your business and create growth.

In next week’s post we’ll discuss forward contracts.

What are spot trades ?

by Cas Majid

In this post I cover spot trades are some of the advantages they will over other types of foreign exchange trade.

Spot trades are transactions used to buy or sell currency for immediate delivery. This is probably the most common type of transaction businesses make, especially those who are using their bank and not getting any advice or forward planning guidance.

– They allow you to take advantage of the exchange rate at a given moment in time

– The transaction is immediate, and currency can be used straight away

– Over a period of time or large volume of currency, spot trades timed correctly can save you thousands of Pounds. Without advice or planning they can also prove a costly expense

In next week’s post we’ll look at limit orders in more detail.

Different types of FX trades

Different types of FX trades

by Cas Majid

In this post we’ll be giving you an overview of the different types of FX trades you can make and the benefits they add to your business.

 

1. Spot Trade

A spot trade is the transaction most of you will be familiar with. For example, someone looking to exchange Pounds to a foreign currency may contact a number of brokers, discuss the exchange rate for that day and agree to use the broker offering the best rate. Spot trades are the most common kind of FX transaction and settled instantaneously. As a result, the main benefit of this type of trade is the individual or business making the trade gets their foreign currency immediately.

2. Limit Order

A limit order is most commonly used to trade a currency pair when certain conditions set in the order are met. The order isn’t executed until those conditions are met. For example, if you are changing Pounds to Euros and you believe the exchange rate will go up you can enter into a limit order and set the rate at which the order should be executed. If today’s rate is 1.26 and you believe it will rise over the course of the week, you can set a limit order at 1.29. If the rate reaches 1.29 Euros for each Pound the broker will automatically execute the trade on your behalf. A benefit of using limit orders is the individual or business making the trade doesn’t have to constantly watch the markets to look for the best rate to make a spot trade. A limit order can be made in advance and then forgotten about.

3. Forward Contract

A forward contract is a way of fixing your exchange rate in advance, so you know exactly how much currency you’ll get for the duration of the contract. Forward contracts can be ideal for those buying or selling property abroad. For example, if you agree to buy a house abroad but the completion date of the sale is a few weeks away you can use a forward contract to guarantee the exchange rate you’ll get and consequently manage and reduce the costs of your purchase.

This week’s post has been an overview of the main types of FX trade. Next week I’ll look at spot trades in more detail.

The benefits of using a FX broker

The benefits of using a FX broker

by Cas Majid

In this blog post I’m going to discuss the top 5 advantages of using a Foreign Exchange (FX) broker for doing business overseas. This information is targeted towards businesses who import or export into international markets, and private individuals who looking to exchange money for property transactions or invest in business opportunities abroad.

1. More money for your money.

The most obvious benefit of using an independent FX broker is getting a better exchange rate. These brokers use the same banks that we all do but because of the volume of currency they trade they’re able to give you a better exchange rate than your bank. Depending on the amount of currency you exchange this saving can soon multiply into thousands of Pounds. Money that is much better off in your pocket than the bank’s.

2. Strategic advice.

When you contact your bank and ask them to change currency pairing, (e.g. Pounds to USD) they will give you the exchange rate for that day and process the transaction. Independent FX brokers are in a position to give you strategic advice which the mainstream banks don’t do unless your doing huge volumes, i.e. Millions per day. For example, you contact the FX broker and say you need to change ten thousand Pounds into Euros. They may ask you to wait a day or two if the market is likely to move in your favour. This means more Euros for your Pounds and ultimately more profit in your business or a large saving on your property purchase abroad.

3. Dedicated dealer.

Mainstream banks don’t offer a personal service where you deal with one dealer. A FX broker will assign you to a dedicated dealer who will take the time to understand your business and its needs in order to give you the best advice possible. Mainstream banks aren’t geared up to provide this service whereas FX brokers employ dealers who spend hours and hours monitoring the volatile FX markets so that they can give you as much or little information as you require.

4. Trust and accessibility

A good FX brokerage will not only assign you a dedicated dealer, as I’ve mentioned in point 3. They will give you added value of coming out to see you at your business premises on regular basis. This means they keep abreast of your business needs, you can put a face to a name and importantly they can adapt with you as your business changes and grows. It’s all about relationships and trust at the end of the day, having a personal relationship with a dedicated FX broker means they are more likely to work closely with for future requirements.

5. No Fees or hidden costs

Generally FX brokers only make money on the trades they do, by making a very small margin. Similarly to the banks we use. However, unlike the banks, the more reputable brokers won’t charge an admin fee. Although admin fees can be considered small anything from approximately £15-£35 pounds per transaction, they can soon add up. If you’re a company that exchanges currency on a regular basis, having the cost of an admin fee on every transaction can soon become a costly exercise.

Next week’s post will explain the different types of FX trades you can make and the benefits of each.