If like me you are not English and as of now (things may change after all), you don't think you gonna spend your whole life in the UK, it is always really painful to watch the GPB crashing versus the Euro. You may not be in a hurry and think that the GBP will ultimately strengthen versus the EUR again but if you have obligations to meet in EUR in the short term you may want to do something.
Convert your money in Euro right now
If you have the GBP right now and if you are really convinced that the GBP will continue to fall this is the solution for you. Your bank may do it for you but you may find better rate by going through specialist brokers. If you are using an offshore bank, they may also hold your money in EUR and provide you saving accounts.
Lock today's exchange rate with a forward
If you don't have the money right now (a payable bonus by example), you may want to lock the current exchange rate for converting your bonus. Your bank of specialized brokers can also do this. It is roughly the equivalent of the 3 following operations:
- borrowing the amount to be converted in GBP
- exchanging it to EUR right now.
- investing the converted amount in EUR
When you deliver the GBP, the bank will deliver the EUR.
By using this solution the exchange rate is fixed today and you will be better off if the GBPEUR get weaker and worst off if it goes in the other way.
An alternative could be to short the GBPEUR through one of these spread betting companies
Benefit for a strengthening Pound while protecting yourself from a potential weakness
The last option you have is to buy derivatives products. AVOID THIS ONE UNLESS YOU REALLY UNDERSTAND WHAT OPTIONS ARE.
Roughly by acquiring a put option on the GBPEUR currency pair, you can edge yourself against a potential weakness of the pound without loosing too much if the GBPEUR get stronger. These options can also be acquired through a spread betting company.
Be really careful as you need to clearly define how much options you need to buy in order to hedge your position without taking to much risks. Moreover an option portfolio should be monitored like heating milk and adjusted regularly.
