Yahoo Finance Should I buy holiday money now or after the general election?
The snap general election is causing volatility for the pound - so should holidaymakers buy their euros and dollars now or wait until after the general election?
Uncertainty around the Brexit deal has been a major factor depressing the value of the pound.
However, sterling has risen since the election was announced, as the expected strengthening of the Conservative Party majority would enable Theresa May to push through a Brexit deal with fewer obstacles.
Against the dollar, sterling has risen from $1.24 to $1.29 since the announcement, a 4pc gain.
The pound has only moved from €1.18 to €1.19 against the euro, as the euro has been buoyed by the expectation that centrist Emmanuel Macron is on course to win the French presidency.
In the run up to the general election additional volatility should be expected, and if the Conservatives gain a large majority, the pound is expected to make further gains.
As the past year has proven however, there is a danger to assuming political outcomes and the impacts they will have on money markets.
Those planning a trip abroad have multiple options to consider.
Buy at the best price you can find
If you don't want to think about exchange rate movements and plan a strategy, buying at today's price and simply ensuring you find the best rate on offer is one option.
You can also use credit or debit cards with low fees on overseas spending, such as Halifax Clarity or Revolut, to spend while you are out there - accepting the rate at the time.
Telegraph Money has produced a guide to finding the best holiday money and other top tips surrounding spending abroad, which you can read here.
The main point is that the best rates are not to be found at banks or the Post Office, and certainly not at transport hubs. In fact, it is often small highly localised suppliers where the best rates are hidden.
MoneySavingExpert has an online tool called TravelMoneyMax that sifts through the rates offered by bureaus, taking your location into account.
Generally, ordering currency online for collection (locking in the rate) generates a better deal than walking in off the street.
According to MyTravelMoney.co.uk, based on changing £500, International Currency exchange offers the best deal including all fees. The rate is $1.26, and you would receive $631 for your £500.
For euros, Travel FX has the best deal, with a €1.17 rate, returning €579 for your £500.
Buy in stages
Buying holiday cash in stages will even out the rate you receive during periods of volatility.
You won’t get the best rate possible overall, but it will prevent you from accidentally buying during a temporary slump, and allow to take advantage of any temporary increases.
For instance, for a July trip requiring $1,000, you could buy $100 a week between now and then.
If doing this, you should be careful to avoid services that charge flat fees, as you will incur multiple charges.
There are also options to guarantee that you won’t lose out on the rate.
Use a buyback guarantee
This is an option offered by some foreign exchange companies, where the company agrees to buy back unused currency at the same rate you bought it at, for a flat fee.
Travelex, American Express and Moneycorp all offer such a guarantee at a cost of £3.99. Time limits, and limits on the total amount, apply in some cases.
Caxton FX has also launched a buyback guarantee card, which for a fee of £4.99 enables holidaymakers to sell back any unused currency on the card at the same rate they bought it – on a maximum of £6,500 worth of currency.
The guarantees are intended to be used by those who have excess money left over after a trip, but can equally be used to ensure the value of your holiday money through the referendum vote, no matter what the outcome.
Read more on how this works here.
Make use of cancellation rights
If you order currency for collection ahead of time, some firms provide you with a right to cancel.
This means you can buy your currency now for collection after the referendum. If the pound strengthens, you can simply cancel the order to get your money back, then buy again at a more favourable rate.
If the pound weakens, you can collect your currency, at the exchange rate that you locked in when you made your order. You will likely only be able to place an order up to two weeks in advance however.
Travelex, Sainsbury's and Moneycorp all have cancellation policies if you order currency for collection.
You will need to be careful to avoid fees however. Sainsbury's Bank's terms and conditions state cancellations will incur a £10 fee.
With Moneycorp you don't pay until you collect, so to cancel you can simply not pick up the cash.
Calling to check exactly what fees could be incurred upon cancellation is advisable.
What about market orders and forward contracts?
A foreign exchange "forward contract" protects you against adverse fluctuations in currency value by allowing you to buy currency up to two years in advance at today's price.
However, a forward contract can also work against you. Should the exchange rate improve, you will miss out on those gains.
There are also "market orders", which allow customers to set a minimum and maximum rate they are willing to pay either side of the current market level.
15 alternatives to another predictable Med holiday
For example, if you know that in six months' time you need to pay for a property in Spain and the current exchange rate against the euro is €1.30, you could place an order to buy the euros if the rate reaches €1.40 and a "stop loss" order to buy the euros at €1.20. If the market level reaches either limit, the currency is bought automatically.
Of course, there is no guarantee that either of these rates will be reached.
These options are most useful for those who need to move large amounts of money, and cannot afford to take a gamble on the rate they will receive.
Read our guide to the cheapest way to send money abroad here.
Have a question for our experts? Email moneyexpert@telegraph.co.uk
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