Exchange rates – Is America a bargain basement for Brits?

Favourable exchange rates for British tourists mean America is the place to shop. The pound has reached the two dollar level for the first time in 15 years, so current exchange rates means the US is a shopper's paradise.

Cheap flights, favourable exchange rates

And while cheap flights to America continue, it's easy for Brits to pile onto transatlantic flights for a weekend shopping spree. But the exchange rates and cheap flights won't last. As the pressure increases from ecologists warning about global warming, the airline industry will soon have to bow to pressure, and the favourable exchange rates won't last either – so now's the time to shop till you drop.

Exchange rates could reach $2.10

Some economists however predict that it will only get better before it gets worse, with the exchange rates even reaching $2.10 to the pound, thanks to interest rates rising in Britain to combat inflation.

Strike while the irons hot

Financial advisors are saying to strike while the irons hot and to take advantage of the strong exchange rages because at some point the balance will change as the tide of favour changes against the pound. Although this wouldn't be great news for Brits shopping on Fifth Avenue, high exchange rates strangle domestic productivity as imported goods are cheaper. So a change in exchange rates that weakened the pound could be a boost for the British manufacturing industry. Stronger exchange rates will mean a further deterioration.

Exchange rates impact on investments

Even small differences in interest rates and exchange rates can make quite a difference to the yield on an investment, so now is a good time to do business if you are a Brit dealing with American denominated assets. But economists are quick to warn that there is no guarantee that exchange rates and financial markets will remain calm. Many believe the pound is touching the upper limits of its value and a reaction or backlash will set in to bring the exchange rates down.

Exchange rates favour British shoppers

How do the exchange rates favour British shoppers in the States now though? The Economist magazine assesses the value of a currency by comparing the actual exchange rates with purchasing power. So for example if a Big Mac costs $3 in America and £2 in Britain, the exchange rates means the pound is overvalued by a third – which means good business for those importing American goods, but hard if you are trying to import and sell goods from Britain to the American market.

Some forecasters estimate the exchange rates will drop and be closer to $1.60 than $2 to the pound within a year – so if you want to shop till you drop in Manhattan, better pack your bags now.

Foreign Currency Exchange Ltd is a commercial currency brokerage based in the UK. We help thousands of clients move hundreds of million pounds across the globe every day. From large businesses to private individuals who wish to send regular payments abroad, you can save money with us by getting better currency exchange rates than with your bank. The Foreign Currency Exchange buys currency at wholesale rates and can help you save money with our fast secure service. For more information contact us now, telephone +44 (0) 20 7989 0000 or email info@fcexchange.co.uk