Sterling has plummeted against other major currencies following the loss of the UK’s AAA credit rating – and the falling value is likely to affect expats.
Since the beginning of the year, Sterling has dropped in value by 7% against the dollar and Euro – a relatively steep fall in such a short period.
Now analysts are predicting that the fall will continue in the months to come.
For many people, what happens on foreign exchanges has little impact on their day-to-day lives but the Pound’s slide is going to affect all of us.
Looking at the figures, a long-term trend reveals that five years ago that £1 would be worth 11% more against the Euro and 25% more against the dollar.
Book now to save
This drop in value will drive up the cost of imported goods, including food, and also petrol which is traded in dollars – but make exports to expats cheaper.
Holidays abroad will also become dearer and the falling Pound could be a disaster for the millions of British expats who have moved abroad to work or have retired to another country.
Anyone thinking of booking a holiday abroad should be aware that currency fluctuations could have a big impact on how much you actually pay and will mean that the currency you buy to spend abroad becomes more expensive.
Booking trips sooner rather than later may save money, since currency experts expect the Pound to continue sliding which means the holidaymaker would effectively save money.
They could also save more by buying their currency today and putting it on a prepaid debit card, which acts like a credit or debit card when you are abroad. Also, if they are stolen the money on the card is refunded.
Tips for investors
These money-saving tactics will be in vain should the Pound rally and increase in value but with the ongoing Eurozone crisis and political issues, nothing can be certain.
You would also save money by not buying currency in ferry ports or airports and Travelex, which runs currency exchange offices, says that the Pound will go further in places like Brazil, Japan and South Africa than it did a year ago.
However, it’s not all bad news since the weak Pound is good for exports and for anyone who owns foreign assets including pension funds.
Investors who have put money into international funds should be seeing profits increase, especially in those funds which are valued in dollars.
Increasingly, investors worried about the fluctuating currency markets should look to hedge their investments with specialist funds.
Investors might want to search out UK-based companies which pay their dividends in dollars such as BP and Glaxo as these values will, inevitably, rise.