The Waiting Game


Strategic FX management is imperative to any overseas transaction, already threatened by adverse market movements. However, no two transactions are ever the same – everyone has different agendas, and rarely are they short-dated.

Foreign exchange is the most liquid and arguably the most volatile market in the world, so when it comes to making currency transactions, it makes sense to shop around for the best rate. This is an approach many take, and on the face of it, rightly so. If you buy in any market, surely you want the best price? But the best price is regularly confused with the best spread, and seldom associated with best value. Rarely is there any more on offer than a highly transactional, execution only service which in the main, is all banks are capable of offering.

The key to effective currency management is to protect from loss, rather than gamble for gain. Understanding short, medium and long term requirements, means careful planning and product selection, along with well informed timing and execution, which aims to reduce the exposure to fluctuations.

Buyers spend months searching for the perfect property or investment, making careful selection around lawyers, real estate experts as well as other professional services, but when it comes to completing on that transaction and exchanging funds from one currency to another, all the hard work and months of searching and negotiating, can be reversed in a quick push of a button or an untimely reactive call with the bank.

FX management should start at the beginning of any property search, so that the prevailing market doesn’t jump up and bite back when least expected. In the case of real estate, fierce negotiations often occur to secure the deal, but without a sound risk management strategy leading up to completion, buyers and sellers can be left significantly out of pocket, with little recourse available to put things right. Not only does this cause irreparable frustration, but it can also put the whole transaction at risk.

Currency should be approached from two angles, the first being ‘what you need right now’ (spot trades) and the second ‘what you are going to need in the future’ (forward contracts). Even if the market is optimum on the day of exchange, consideration has to be given to the balance required to complete in the weeks or months to follow. If the market moves significantly during that time, which is very possible given the geopolitical and economic environment, the agreed purchase/sale price can change significantly if the correct risk management is not in place.

For context, during August alone, GBP EUR has traded a range of nearly three cents. Exchanging at the wrong end of this range could mean the difference of around £10,000 for every €500,000 spent.

It’s possible to obtain the information required to help make the best decisions possible, without hours of analysis or pages of reports. Sometimes a long time period spans the buying or selling process and having useful real time knowledge of the markets throughout allows people to stay steady and informed.

Lucid Financial Markets has decades of experience in both high value real estate transactions and FX risk management. Tying this together creates an entirely unique service. We work alongside clients throughout the transaction, adding FX strategy when it is necessary and relevant. We understand every aspect of the property acquisition, and as both transactions unfold, we remain fully available to provide everything required, including individual currency accounts, market information and best execution, as well as ongoing payment and settlement advice.

Building lasting relationships is essential to what we do. We are not a remitter, but a professional service that aims to provide an exceptional level of expertise and support. Currency transactions don’t need to be difficult. When managed correctly, significant value can be added to achieve a successful outcome.

020 8106 0106


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