Although inflation has fallen, experts have told HuffPost UK now is the ideal time to exchange your sterling for euros or dollars ahead of any upcoming holidays.
Why? Because thanks to strong pound, you’ll get more value for your money if you exchange it now.
Here’s what you need to know.
Why is it a good time to get foreign currency out?
Specialists – like Torsten Bell, from the think tank the Resolution Foundation – have hinted that withdrawing foreign currency today, or pretty soon, is a good idea if you’re planning on going on holiday in the upcoming weeks.
Matt Mckenna, head of communications and consumer advocate at personal finance comparison site finder.com, also told HuffPost UK that it’s good to make the most of a strong pound right now, because you’ll get more out of it.
Why is it a good idea to get dollars out?
Mckenna explained: “Broadly speaking, it is a good time to buy dollars and those who want to avoid risk may want to consider buying some now.”
He continued: “The pound has been trending upwards against USD for some time and hit its highest point in a year last week, with £1 equalling $1.31 (which was up over 10% compared to a year ago!).”
While he acknowledged that this had “fallen relatively steeply to $1.29” after the UK announced an inflation rate of 7.9% – which is a rate lower than expected – Mckenna pointed out that it appears to “have stabilised somewhat after the initial drop and remains an attractive rate overall.”
He added that while it can be “notoriously hard” to predict how currencies change, other experts have told finder.com that they expect the pound to strengthen against the dollar by the end of the year.
What about exchanging pounds for euros?
However, the specialist warned that the euro is more uncertain than the dollar – and it has already been hit by the inflation news announced earlier today, falling to €1.15 from over €1.17 last week.
Still, he added: “This is still significantly higher than the lows of €1.11 it hit in February.”
He added that the future “the jury is out as to what happens next” between the pound and the euro before the end of the year.
What does inflation mean for the pound?
The think tank Resolution Foundation told HuffPost UK that the “pound had strengthened recently on market expectations that interest rates were going to have to go up again and stay there for longer”.
Interest rates from the bank are currently at the very high rate of 5%.
High interest rates helps make the pound stronger, as the Bank of England explains.
However, on Wednesday, the Office for National Statistics (ONS) unveiled its new inflation rate for the 12 months up to June was 7.9% – much lower than expected, and down from 8.7% for May.
While that’s good for the UK overall, it means that the pound might soon fall if the Bank doesn’t keep up its high interest rates.
As the Resolution Foundation explained: “Inflation looking more normal means that interest rate expectations are normalising – and the pound is falling back accordingly. ”
That’s why it’s worth getting out your foreign currency, stat, during this brief window.
What else do we need to know about inflation in general?
Not everyone is convinced that there will be a fall in interest rates – which will next be announced on August 3 by the Bank – after the unexpected dip in inflation.
Chris Daniels, chief commercial officer at SmartSave, said: “Today’s data confirms what we already knew – inflation is not falling fast enough, and the Bank of England may have to raise interest rates again.”
Meanwhile, CEO of ZIPZERO, Mahsin Rashin, pointed out that consumers are set to suffer if they’re still spending in the UK.
He explained: “This small drop in inflation will not haul consumers back from the cliff’s edge.
“Yes, supermarkets have begun to react by cutting prices and introducing deals for loyalty card members, and the government is trying to flex its muscles to encourage retailers to lower prices.
“But sadly, much of this feels a little like bolting the stable door with the horse well and truly out of sight.”