Can I buy Euros to avoid savings erosion when the Brexit hits the fan next week?

Simon_Brown_2

itsthenoise10 wrote: »

I know that some of the loss of the pound has already happened. But, is it possible for a UK citizen to change their cash savings into Euros to avoid the losses that a Pound fall next week will inevitably bring; when May's bill is very likely put out of its misery next week in Parliament?

Have you considered buying some Euro denominated high grade corporate bonds?

Holding any kind of foreign currency in any bank account is really not encouraged by the govt. So even if you can find a High Street bank to offer you a Euro bank account, they'll hit you with fees / commission / poor exchange / no interest etc.

dont_use_vistaprint

greendoor665 wrote: »

There won't be some sort of cliff edge on the day. In fact it's just as likely the pound will rise as the uncertainty is lifted.

There are other factors than Brexit causing a weak pound at the moment, I dont share your optimism and wouldn't be at all surprised to see a pound worth a dollar in a couple of months, but agree its impossible to know

Simon_Brown_2

dont_use_vistaprint wrote: »

There are other factors than Brexit causing a weak pound at the moment, I dont share your optimism and wouldn't be at all surprised to see a pound worth a dollar in a couple of months, but agree its impossible to know

Probably one reason is that the govt / BoE want a weak pound - which is why they're keeping interest rates so low.

System

Simon_Brown wrote: »

Holding any kind of foreign currency in any bank account is really not encouraged by the govt.

Simon_Brown wrote: »

Probably one reason is that the govt / BoE want a weak pound - which is why they're keeping interest rates so low.

Either you have a lot of inside information about government policy or you believe every daft conspiracy theory. I suspect that it is the latter.

aroominyork

It’s up to individuals to take a punt if they want to. I find it curious how often people say future eventualities are priced in; if that were the case we may as well just open the markets one day a year. The Wellcome Trust took a view on the impact on Sterling of the possible outcomes of the Brexit referendum and made a shedload of cash which is now doing a world of good. But the OP would do well to consider that the morning after the referendum night before is a whole different kettle of fish from the many twists and turns that Brexit will take before 29 March 2019.

MEM62

Plus wrote: »

I don't think this is a silly question. It's not bad to want to hedge your money, particularly if you are exposed to global prices (which we all are to some degree - so much is imported, and commodities we consume like oil are expressly priced in dollars).

However to do that you need some understanding of risk - and somebody asking about 'savings erosion' might not understand that there's a substantial chance of the value of their money going down as well as up. Therefore it's not a dead cert, but could be useful as part of a hedging strategy that's designed to mitigate the risk - although, as others pointed out, at this point the pessimism may already be priced in.

Using foreign currency as a mechanism to prevent your savings from erosion is extremely silly.

The only currency the OP can buy goods with is sterling. Therefore, whatever currency the OP converts his money into will need to be converted back into sterling in order for him to spend it. If sterling suffers a spectacular collapse and everything we buy that is imported is doubles in price the OP will have to pay the inflated price anyway. Where is their gain from the conversion to Euros and back?

Even if there were a case for the OP to put his money into a currency with less potential volatility, you would not choose the Euro.

MataNui

Nope. Its not a good idea.


You will be paying retail spread which is so many times greater than the spread on the underlying markets you are absolutely 100% guaranteed to lose on both ends of the transaction (unless you believe GBP will drop to cents which all the evidence so far would suggest wont happen).


In fact if you look at the actual drops the underlying changed by less than the average retail spread before things went wrong. All that happened was retail spread got wider. Meaning you will make a massive profit if you do this. Its just not going to be your profit.

System

MEM62 wrote: »

The only currency the OP can buy goods with is sterling. Therefore, whatever currency the OP converts his money into will need to be converted back into sterling in order for him to spend it. If sterling suffers a spectacular collapse and everything we buy that is imported is doubles in price the OP will have to pay the inflated price anyway. Where is their gain from the conversion to Euros and back?

The OP will have more pounds when they convert back to sterling than they had at the beginning to pay the inflated prices!

greendoor665

dont_use_vistaprint wrote: »

There are other factors than Brexit causing a weak pound at the moment, I dont share your optimism and wouldn't be at all surprised to see a pound worth a dollar in a couple of months, but agree its impossible to know

I wasn't talking about the general state of things, just the effect of this vote in isolation. Indeed there are many other factors affecting the markets, as there all the time. Which further demonstrates the point that trying to time the market and gamble on the outcome of one event is foolish as there are so many other factors at play which could have the opposite effect.

aroominyork wrote: »

It’s up to individuals to take a punt if they want to. I find it curious how often people say future eventualities are priced in; if that were the case we may as well just open the markets one day a year.

You misinterpret the point. Not all future eventualities are priced in. Rather, the market's best guess of future eventualities, based on currently known information, is priced in. New information is flowing 24 hours a day in the fast paced modern world. Whenever new information comes to light, the market assesses it and the prices move to reflect it. The market can be wrong about the future of course, but it quickly corrects itself when it realises.

Malthusian

ColdIron wrote: »

Is this a serious question or have you created an account just to make a political point?

Post #9 confirms its the latter.

Discussion Time is that way, my sockpuppet friend. 1 and a half out of 10 troll points.