I have been watching the exchange rates quite intensely of late as I have quite a few clients with money in the GBP account in Australia after transferring Pensions here and are hoping for an improvement in the exchange rates before converting funds.
Whilst I cannot predict the movements in rates I do believe that we have seen the worst of things. For me I feel that the bottom was around 12 October when the rate dropped to low 1.7’s but since then has gradually crept upwards.
The reason that I cannot see it getting back to that level or below is that the Pound seems to have held its ground since getting to around 1.80 and through two announcements/movements that could and usually does have a big impact.
These being the results of the UK economy last week when it was announced that the UK had seen a 6th consecutive quarter of negative growth and more recently the RBA hiking Australian interest rates for the second month in a row by 0.25%, as I say usually this would have a negative effect on the pound however it seems to have held its ground.
I cannot obviously say where it will go from here but I do think the worst is behind us. Although I cannot see them getting much stronger for a while yet.
Some considerations to take in to account if you have UK funds to transfer has to be based on what the purpose of using those funds in Australia are, as follows:
1. If the money is savings will the interest rate you achieve in Australia outweigh the potential gain you may make on an exchange rate increase in the future. You can achieve around 6% on deposit accounts currently, if interest rates continue to increase in Australia this will get higher.
2. If the money is to purchase property, predictions that the Adelaide property market is only going to increase by 9% over the next 3 years (also some predictions of falls) may be a reason to hold on exchanging. Obviously some people want a home sooner so securing a home now might be more of a priority.
3. If the money is to be invested in markets, could waiting for the exchange to improve lose the growth that you may otherwise have achieved being invested in the markets, although we have seen some big returns of late the markets are still around 50% lower than before the big fall. I suppose this would be more relevant to Pensions left in the UK. However it would then go deeper than this as you may already be invested in the markets in the UK so still have the potential growth there or you may not be and have a Final salary scheme whereby the money is only growing at UK inflation.
Again crystal ball time but these are some considerations as well as lots of others that should and will be going on in the thought process when looking at exchanging funds.
As I say these are just observations and my own opinions and not advice, if you feel that you need advice please approach the appropriate people.