Euro exchange rate breaks significant barrier

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This week the Euro exchange rate made headlines when it went past 1.4 Euros to the Pound. I have fet like a bit of a doom monger for the last couple of months saying that I would not be surprised if the Euro hit 1.5 and now it is a case of counting down the cents until that is a reality.

We recently launched our money transfers page and I have referred to it a couple of times on here since Dan announced the launch. What this does allow you to see is the difference to what I like to call the ‘tourist exchange rate‘ or ‘holiday money rates‘ and the larger international transfers. Right now, at the time of writing, the international transfers are offering 1.4065 Euros to the pound compared to 1.3920. That difference of nearly 2% represent the cost to the currency supplier in handling physical notes and coins and sending the money out to you. The transfer provider also has expenses often referred to as ‘landing fees’. The actual interbank rate that all these suplier would be looking to buy your currency at is 1.41195. You can really see how tight the margins are in this industry and how competitive it all is.

A lot of people are not that comfortable with decimals especially when it gets down to five decimal places so let me put that into Pounds and pence. If you need about €1500 and you decided to buy that as cash, the currency supplier would charge you £1077.59. If you did it as a transfer then you would be charged £1066.48 saing yourself £11.11 for doing a transfer. The currency supplier would have spent £1062.36 buying the currency for you and making just £4.12 gross profit on the transfer and £15.23 on the cash.  It hardly seems worth it for just €1500 but I was talking to someone last Friday who was releasing some equity in an apartment in Florida and was looking at bringing $20,000USD back into the country. Now you are looking at saving £200 on the transaction at least by choosing to use a transfer agent.

You do not really get this sort of competitive market anywhere else. The Amricans can take their dollars anywhere in the world and change them locally if they even need to change them at all. Our european neighbours mostly holiday in other eurozone countries so there is no significant market there, it is only just that have to change their currency and have the culture of working and travelling abroad.

advert for NatWest giving holiday money advice.

Helpful? I think not!

Talking of competition, the rates I chose for these examples were the best in the martket at the time of writing but let us assume you just went to your bank and did not stop to compare the exchange rates (not that you would do such a thing!) if you had bought your currency from Nat West, the helpful bank, you would have paid £1125.87 and the bank would have made a profit of £63.51 on the transaction. It is doing deals like that thousands of times a day, every day that enable them to make annual profits in the billions of pounds. That is why I bang on and on about not going to the high street banks to get your travel money!

Posted by Peter Rudin-Burgess

Peter Rudin-Burgess

Peter is one of the founding partners for both Compare Holiday Money and Currency Buy Back. He regularly blogs on financial matters and writes content for a number of blogs in the travel industry.

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