Having a basic understanding of foreign currency is important if you are looking to get the best exchange rate when you buy your Euros. If you are travelling anywhere in Europe you will need to be prepared and the more organised you are the better the rate you can get when it comes to buying your travel money.
Part of the problem in understanding exchange rates is the language. Some of the wording can seem contradictory so a higher exchange rate may get you less money but a weaker Euro will get you more. A strong pound can buy more or a weaker currency this will give a higher exchange rate. The other option is that a weak Euro will cost you less so you will get more for your pound as well.
So what is the difference?
If the Pound is strong then it will buy more for you against every currency not just the Euro. If the Euro is weak then you will still be able to get more Euros for your holiday but the exchange rate for US Dollars is Swiss Francs won’t change. It is simply that that relationship between the Euro and the pound as far as we are concerned has changed.
Who can you use this?
Right now the Euro is weak because there is so much worry over the banking and sovereign debt that the money traders do not want to buy lots of Euros, the people with lots of Euros to sell basically have to accept lower prices to get rid of them. What this means to you is that all the countries that use the single currency will be cheaper for us to visit. The weak Euro though does not help against the US Dollar or Swiss Franc.
There is a third factor at play and that is what they refer to as ‘safe haven currencies’. Right now the top three are the US Dollar, Swiss Franc and British Pounds. These are the currencies that the traders are holding their reserves in and that has made the value of these three shoot up every time there is another Eurozone crisis.
Putting that together means that for us the Eurozone countries are going to be the best value for money, the safe haven currencies the worst value for money and everything else is probably better value than it has been for the last five years but not as good as the Euro.
If you want to visit one of these middle layer countries then it is certainly worth looking at a multi currency pre paid card. These are ‘charged up’ with pounds (meaning you get the advantages of the strong Pound) but you do not have to commit to buying any particular currency, you can just take out your money through any ATM cash machine almost anywhere in the world assuming you can find an ATM machine to put your card in.
Obviously the above is a massively simplified view and should not be construed as financial advice, we are not regulated by the FCA (and prior to the 1st April 2013, the FSA) and we cannot and do not give financial advice. Right now though, the Euro compared to the pre 2008 value looks like very good value can you can compare the Euro rates on our Euro homepage.