How do Changes in the US Interest Rates Affect British Business & Exchange Rates

How do Changes in the US Interest Rates Affect British Business & Exchange Rates

For the first time since 2006, the U.S Central Bank have today announced a rise in interest rates.

In an attempt to stimulate the U.S. economy, the Federal Reserve had maintained interest rates near zero since 2006. Despite these facts, the U.S. dollar has enjoyed favourable exchange rates in relation to the currencies of most other nations. This is partially due to the fact that the U.S. retains, at least to some extent, the position of being the reserve currency for much of the world. Also, the U.S. dollar is still perceived as a safe haven in an economically uncertain world.

This fact, more so than interest rates, inflation or other considerations, has proven to be the overriding and determining factor for the relative value of the U.S. dollar.

So how do changes in interest rates affect a currency’s value and exchange rate?

All other factors being equal, higher interest rates in a country increase the value of that country’s currency relative to nations offering lower interest rates.

However, such simple straight-line calculations rarely, if ever, exist in foreign exchange. Although interest rates can be a major factor influencing currency value and exchange rates, the final determination of a currency’s exchange rate with other currencies is the result of a number of interrelated elements that reflect and impact the overall financial condition of a country in respect to that of other nations.

Generally, higher interest rates increase the value of a given country’s currency. The higher interest rates that can be earned tend to attract foreign investment, increasing the demand for and value of the home country’s currency. Conversely, lower interest rates tend to be unattractive for foreign investment and decrease the currency’s relative value.

However, this simple equation is complicated by a host of other factors that impact currency value and exchange rates. One of the primary complicating factors is the interrelationship that exists between higher interest rates and inflation. The rise of interest rates in a country often spurs inflation, and higher inflation tends to decrease the value of a currency. If a country can manage to achieve a successful balance of increased interest rates without an accompanying increase in inflation, then the value and exchange rate for its currency is more likely to rise.

Interest rates alone do not determine the value of a currency. Two other factors that are often of greater importance are political and economic stability and the demand for a country’s goods and services. Factors such as a country’s balance of trade between imports and exports can be a much more crucial determining factor for currency value. Greater demand for a country’s products means greater demand for the country’s currency as well. Favourable gross domestic product (GDP) and balance of trade numbers are key figures that analysts and investors consider in assessing the desirability of owning a given currency.

Another important factor is a country’s level of debt. While they can be managed for some period of time, high levels of debt eventually lead to higher inflation rates and may ultimately trigger an official devaluation of a country’s currency.

The importance of getting the latest market intelligence and strategic FX advice

The best industry experts will provide you with the latest market intelligence and strategic advice. Their strategic analysts can help businesses to develop personalised FX strategies, including the use of several important tools to get the best short and long term returns. These include a combination of FORWARDS, SPOTS, STOPS and occasionally OPTIONS.

For the best exchange rates and strategic advice, please contact FX Introducer

E: forex@fxintroducer.com
M: 07432 598078
W: www.fxintroducer.com

Beat the Foreign Exchange Trap

Beat the Foreign Exchange Trap

Beat the foreign exchange trap: Send money overseas securely and cheaply

Money transfers overseas are big business for banks and make them a nice profit. But if you want to save money, when sending a large sum of money abroad, the best option is to dodge your bank and use a specialist Foreign Exchange (FX) broker.

Particularly for individuals who are buying or selling a property abroad, emigrating or investing in businesses, it is likely to be the biggest foreign exchange transaction they ever make.

In order to get the best deal, it is important to shop around and select the best FX broker. A small percentage difference in the rate can result in large savings. For example, if you are a buying a home for £400,000 and you can find an FX firm offering an improvement of just 1 per cent, you would save £4,000.

Free, Independent advice from companies like www.fxintroducer.com can help you to compare brokers and get the best deal. FX Introducer can also advise on how best to time your transaction and about things to watch out for, such as transaction charges.

How do I find the cheapest way to transfer money?

A good starting point is to ask your bank for a quote. They are unlikely to offer the best rate, but it does give you a benchmark. You should then check the rates and services that are offered from a range of top FX brokers – www.fxintroducer.com is one such website that can help you to do this. It provides an independent and transparent comparison of the best value services. It caters for most currencies and demonstrates the savings that can be made on any value of transaction.

5 Things to Consider When Choosing a Foreign Exchange Broker

5 Things to Consider When Choosing a Foreign Exchange Broker

The forex market is very competitive, chances are that you have already received cold calls from FX brokers, claiming to offer you the best deal. With so many different providers out there, how do you pick the best broker? The following are the qualities you should look for:

1. Security

First and foremost a good broker must have a high level of security. Fortunately, checking the credibility of a forex broker isn’t very hard. Before even THINKING of choosing a broker, make sure that the broker is a member of the Financial Conduct Authority (FCA).

2. Best Value

No matter what kind of currency you wish to convert, like it or not, you will always be subject to costs. Every time you make a trade, you will have to pay for the execution of the trade (the difference between the rate you get and the interbank rate). However, you should ensure that no set up costs or transaction charges are added.

It is only natural to look for the most affordable and cheapest rates. However, some brokers can appear very competitive on the first transaction, but may not offer consistently good rates.

3. Strategic Advice

Whilst it is important to identify the best exchange rate at any given point, it is much more important to plan ahead and time those transactions correctly. Your broker should therefore provide free analysis and strategic advice and help you to develop personalised strategies to mitigate your FX exposure, including the use of several important tools to get the best short and long term returns. These include a combination of FORWARDS, SPOTS, STOPS and occasionally OPTIONS.

4. Market Knowledge / Daily Updates

Your broker should take a proactive approach to ensure that trades are timed when prices are optimal. This takes advantage of short term fluctuations including overnight price spikes. They should therefore work closely with the 24 hour FX market. Do they offer a free news feed? How about easy-to-use technical and charting tools? Do they present you with all the information you will need to trade properly?

5. Customer Service

Brokers aren’t perfect, and therefore you must pick a broker that you can easily contact for advice or when problems arise.

The competence of brokers when dealing with account or technical support issues is just as important as their performance on executing trades. Brokers may be kind and helpful during the account opening process, but have poor ongoing customer service.

Check which businesses use their FX services, take independent advice and ask for testimonials or case studies as appropriate.

It’s no joke, timing really is the key to getting the best foreign currency returns!

It’s no joke, timing really is the key to getting the best foreign currency returns!

They say the secret to good comedy is timing! We say, the secret to maximising your foreign exchange returns is timing too!

Most businesses look for the best spot rates when they have currency to buy or sell. Whilst it is important to identify the best exchange rate at any given point, it is much more important to plan ahead and time those transactions correctly.

At FXIntroducer.com, we offer free independent advice to help businesses and private clients, to maximise returns from foreign currency transactions.

We work with the best industry experts to provide you with the latest market intelligence and strategic advice. Our strategic analysts will help you to develop personalised strategies, including the use of several important tools to get the best short and long term returns. These include a combination of FORWARDS, SPOTS, STOPS and occasionally LIMIT ORDERS.

As FXIntroducer.com work with a panel of specialist FX brokers, we are uniquely placed to provide an independent benefits driven view. What’s more, our services are completely free of charge and with no contractual obligation to use a particular broker.

Our market leading panel of brokers do not charge transaction fees (unlike some banks), and are on average up to 6% cheaper than banks when they execute such trades.

Remember, there is no obligation to use a particular broker, no set up costs, no transaction charges and the bottom line is that we will add value on your foreign exchange rates by guiding you with recent and future market trends and optimising the timing and execution of your transaction.
In particular, businesses and individuals looking to buy Dollars and sell Euros may benefit from a forward contract to hedge against adverse market movements.

Lets meet for a coffee and have a chat about how we can add value to you and your clients.