H E L P I N G Y O U B E B R E X I T R E A D Y

2

C O N T E N T S

Supporting you through Brexit uncertaintyAre you really prepared?Expect further volatilityWhat’s next for sterling?

Tim’s Story: Protecting his InvestmentBe Brexit ready

Choosing the right product for you

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S U P P O R T I N G Y O U T H R O U G H B R E X I T U N C E R T A I N T Y

To help determine the best course of action for you, Caxton has written a guide to help you understand the risks relating to Brexit, your international payment needs, and how to protect yourself from ongoing volatility

within the FX markets.

Helping our customers every step of the way to protect their funds through Brexit and beyond is what we do best at Caxton Premier. For more information on helping you to deliver a simple but effective currency plan to minimise risk,

please contact our Premier Account Management team directly on +44 (0) 808 250 2708

Edward GottHead of FX Private Clients

+44 (0) 808 250 2708

Edward.Gott@caxtonfx.com

A R E Y O U R E A L L Y P R E P A R E D ?

Since the referendum, sterling has been extremely sensitive to economic data and political comments. This is set to continue even as the UK leaves the EU on 29 March

2019, as the two sides have agreed to a 21-month transition period to December

2020, during which time EU law will remain in the UK.

E X P E C T F U R T H E R V O L A T I L I T Y

Yes, the initial doom and gloom was overstated, it was borne of a belief that there would be an immediate economic impact. However, the UK economy has remained resilient. The economy

has NOT been the driving force behind currency volatility since June 2016, with political events, Brexit announcements, and market sentiment

coming to the fore.

G B P / E U R A N D G B P / U S D V O L A T I L I T Y S I N C E J U N E 2 0 1 6 P O L I T I C A L E V E N T S T H A T M O V E D T H E F X M A R K E T S

€

23.06.2016 Referendum on Brexit

06.2016 Legal challenge to Government invoking Article 50 withoutconsulting Parliament

29.03.2017UK formally invokes Article 50

28.08.2017 CPI 2.9%, BOE hints at possible rate hikes

18.04.2018UK CPI drops to 2.5%, Rate hike probability drops from 85% to 25%

07.10.2016Flash Crash during a panicked market

1.2000

1.2500

1.3000

1.3500

1.4000

1.4500

1.1000

1.1500

1.2000

1.2500

1.3000

$

17.01.2017 PM May’s speech on Brexit

19.04.2017 Snap election announcement

08.06.2017 UK Snap election

£

£

£

£

£

£

£

£

£

19.03.2018Brexit transition deal. UK can negotiate trade deals with other countries

£

5

W H A T ’ S N E X T F O R S T E R L I N G ?

This is difficult to determine until we have certainty or sight of likely negotiated outcomes. Currently we have a market in a state of flux which is leaning towards political influences and reacts to statements, as opposed to the traditional and more rational

technical and fundamental market data.

While the broad outline of a deal is expected to be agreed between October 2018 (the preferred deadline) and March 2019, sterling could still see uncertainty throughout the 21-month transition period as the final details are ironed out.

“In the current economic environment, if you're not hedging you may be speculating”Rehan Ansari, Head of Options

H A R D B R E X I TExchange rate uncertainty

High market volatility

Difficulty forecasting due to currency movement

Uncertain trading practices

£

£S O F T B R E X I T

Market confidence

Liquid markets

Optimistic sentiment

Understanding of trading practices

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B R E X I T T I M E L I N E

Great Repeal Bill continues to be debated.

Royal assent delayedParliament may need to pass laws to cover legislation gaps

Both Houses of Parliament and European Council

and Parliament will have to vote on any deal

European Parliament election

Greek legislative election

Spanish general election

Transition period ends

Two year negotiating window closes.

Carney’s term as Bank of England Governor set to end

Portuguese legislative election

United States presidential election

MID 2018

LATE 2018

MAR 2019

JUN 2019

OCT 2019

NOV2020

EARLY 2019

MAY 2019

OCT 2019

JUL 2019

DEC 2020

LATE 2018

30 SEP2018

EU Summit. Barnier’s deal decision

EU negotiator Michel Barnier wants to wrap up Brexit terms

MARCH

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T I M ’ S S T O R Y : P R O T E C T I N G H I S I N V E S T M E N T

Tim had always dreamed of owning a property in Italy, and in 2015 he was finally able to fulfill that dream. Having finally saved up the funds for the purchase, Tim wanted to make sure that his foreign exchange risk was secure and minimised.

“We purchased an apartment in Italy in early Summer 2015. This in itself was stressful but added to this we had the uncertainty of the Brexit vote and its impact on the exchange rate looming over us. Knowing when to transfer funds was an added stress.

Caxton were invaluable – not only did they advise us at every stage regarding possible fluctuations, but they suggested spreading the risk by exchanging small lump sums over a period of time. In the end this was sound advice – if we had waited until after the

Brexit vote we would have lost a great deal of money.” – Tim Wooff, Caxton Customer

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B E B R E X I T R E A D Y

Due to recent volatility, people are realising that a key component of protecting their funds is the implementation of more thorough risk-management processes. Private individuals with exposure to foreign currencies are prioritising the cost of their foreign exchange and developing more flexible hedging strategies to effectively respond to the increased market

volatility more than expected.

S P O T C O N T R A C TNeed to move money overseas quickly? We’ll let you know the rate and the amount of foreign currency you’ll get for your money. Once the trade is booked, you just need to get the agreed payment to us within four working days. Spot deals are simple, fast and effective.

+ Fast

Easy

React to fluctuations easily

-Rate dependent on market

No control

L I M I T O R D E RIdentify a realistic target rate with your dedicated Account Manager, and should that rate become available at any time within the agreed time frame, Caxton will execute that trade, ensuring you didn’t miss out.

+ Control

Speed

Peace of mind

-No guarantee of target rate

Target rate Spot rate

Curr

ency

V G

BP

Time frame

1 0

C H O O S I N G T H E R I G H T P R O D U C T F O R Y O U

With the foreign exchange market preparing for extreme changes and unpredictability, there has never been a more imminent time than now to protect your global portfolio for the future. Currency exchange can seem like a complicated process, with a range of products vying for your attention. Your dedicated Account Manager is on hand to help you find the payment option

that’s right for you.

C U R R E N C Y O P T I O NNot 100% sure the purchase will go ahead? This premium product gives you the right but not the obligation to purchase the foreign currency on the date agreed in the contract. Protect your downside rate and participate fully in any upside movement in the market.

If the market moves in a favourable direction you can choose to buy at that rate. If the market takes a turn for the worse, you know you have a better rate already locked in.

+ No obligation to convert

Benefit from upside

Fixed protection

Flexible

-Upfront premium

Favourable market movement may not be enough to offset premium cost

F O R W A R D C O N T R A C TGot some time before you need to make the payment? We can help you secure your foreign currency at the optimum exchange rate. Once you’ve paid a deposit, you can defer the final payment until a specific date in the future (say, when the property deal is scheduled to go through). This contract provides full protection against the depreciation of the spot rate, but will not be able to benefit should the spot rate in the currency pair appreciate.

+ Fixed Protection

Zero-cost

Able to budget

-Deposit required

Obligation to convert

F L E X I - F O R W A R D C O N T R A C T (sub-type of Forward contract)Worried your deal won’t go through on the agreed date? Why not give yourself a few weeks of leeway just in case. Flexi-forwards allow a degree of flexibility on the date you make the final payment. The rate won’t match a forward contract deal, but for many it’s a small cost for peace of mind.

+ Withdraw all or part of the funds at any time

Fixed protection

-Deposit required

Obligation to convert

Hedged rate Spot rate

Curr

ency

V G

BP

Payment 1 Payment 2 Payment 3

1 1

For further information on how to implement a simple plan but effective currency plan to prepare your personal finances to protect you through the next 6-12 months of Brexit, please contact Ed or his team of Premier Account Managers.

FX Private Clients Team +44 (0) 808 250 2708 Caxtonfx.com/premier