Rise and fall: don’t hoard your euros

Rise and fall
Rise and fall

Given all the uncertainties of financial markets at the moment, small business leaders could be forgiven for thinking it might be best to sit tight and hold on to their hard-earned cash…

However, SMEs that are stockpiling payments they are receiving in euros, rather than converting it as soon as possible to sterling, are making a big mistake.

Hamish Anderson, CEO of dedicated SME FX and international payments platform Money Mover, explains: “The exchange rate now is far from favourable for this conversion. This is down to ongoing uncertainty in the Eurozone – the fear of Grexit has reduced confidence despite its resolution – and the continuing strength of the UK economy. This, plus other factors, has meant that the euro has been weak against the pound for some time. So why convert now, when there’s a chance that the rate will be more favourable in six months or even two or three?

“By hoarding this currency, rather than exchanging it, these SMEs are effectively engaging in currency speculation, something that carries a lot of risk – in much the same way as putting the money on a horse would carry risk. It’s also a distraction small businesses don’t need. Currency markets are unpredictable: you may look at the current situation and assume that, through the simple law of the return to the mean, things will get better for the euro in the future. Unfortunately, there is simply no guarantee that will be the case.”

In the next instalment of our Rise and Fall series, we take a look at the underlying European economy…