Buy your euros now, says currency expert – the pound is only going in one direction

Holidaymakers should purchase currency for any upcoming trips now, as the pound is unlikely to be in a better position for the rest of the year.

This is the advice of a money expert who predicts that sterling’s surge in the wake of the UK's fragile Brexit transitional deal is the best British travellers can hope for in 2018.

Nick Parsons, a senior writer at foreign exchange firm Ofx, told a forum on Brexit organised by travel association Abta: “The pound is about as good as it gets. Forward buy some of your currency needs.

“The economic background is going to be challenging for the UK economy and the travel industry.”

The pound is currently worth €1.14, up nearly 1 per cent since Monday, and $1.40 - almost returning to the value it held before the 2016 referendum.

Compared to six months ago, sterling is up 2 per cent on the euro and 6 per cent on the dollar.

The modest rises follow years of turmoil for the pound, especially against the euro, since the UK voted to leave the EU. In August last year, the pound was nearly at parity with the single currency, prompting a number of bureaux de changes to sell at below €1. On the eve of the referendum, a pound was worth €1.30.

The collapse in the value of sterling saw the cost of expenditures abroad soar for the majority of British holidaymakers. Some were even subjected to a surcharge by their tour operator.

Nick Parsons told the forum: “The pace of growth we’re going to see over the next few years will be dismal.”

Ian Strafford-Taylor, CEO of travel money and currency provider FairFX, said there is no saying how the pound will fare over the next year.

“As a matter of course, exchange rates fluctuate throughout the year - something we’re experiencing even more so following the Brexit referendum,” he said.

“Monday’s decision could help alleviate some of the uncertainty around Brexit which may be reflected in the exchange rate [but] it’s impossible to tell how currency will swing as further discussions take place in the negotiations process.”

He advised that travellers should monitor currency exchange rates before a holiday and “lock in” a rate when it appears favourable.

In the light of the increasingly positive exchange rate for the US dollar, many Caribbean destinations - the currencies of which are linked to the dollar - have become attractive destinations for UK travellers. The same is true of the Middle East. 

A study by the Post Office in February found that sterling was performing well in eight out of 10 destinations compared to the same time in 2017. Turkey, Brazil and Indonesia were among some of the countries where the pound had done best in the last 12 months. 

However, it remained down on a number of European countries, including Poland, Croatia and those in the Eurozone. 

Five top tips for managing your travel money

1. Avoid airports

Do not rely on buying currency at the airport. You are part of a captive market. Rates are rarely competitive with those available on the high street.

2. Use credit cards, but carefully

Generally, paying by credit card gives you a better rate than paying by debit card or cash. But this advice doesn’t apply if you are not able to clear the balance each month. The interest you pay on that balance will only add to your costs.

3. Consider a currency card

Get a competitive bank or currency card. The best pre-paid varieties now offer excellent value. The Monzo card, for example, allows you to always keep your balance in sterling without having to convert into a specific currency in advance, meaning you aren't stung by the difference between buy and sell rates. Alternatively, the Halifax Clarity card is one of the best value credit cards for using overseas (halifax.co.uk/travel).

4. Lean towards the local currency

If you are offered the choice between paying a card bill in sterling or the local currency, opt for the local currency. This option is becoming more and more common - at restaurants, shops, hotels, and at cash points. It is highly unlikely that the vendor or their bank will offer you a rate on sterling which is better than you will get automatically from the card issuer.

5. Hold on to your cash

If travelling to the eurozone, or another country that you visit regularly, keep some cash in hand and take it home with you so that you have a small float to take with you next time you visit.