How much should you be spending on a pint on holiday?

Even the most well-seasoned travellers can be caught off-guard by fluctuating exchange rates.

By its nature, the floating exchange rate system is volatile. It’s regularly impacted by world events like Brexit, or factors like economic performance, interest rates and the supply and demand of certain currencies.

While the state of world politics might not be the most interesting topic for everyone, it pays to know what’s happening in the world and its impact on exchange rates when planning a trip overseas. As the foreign exchange market moves 24/7, the rates change constantly too. This can ultimately impact how much you can spend on a trip abroad once you’ve made the currency conversion.

Rapid, unpredictable changes in the foreign exchange market (also known as volatility) can also impact the travel trends of the moment. Heading to Europe might have once been a very attractive option for UK travellers. But with ongoing Brexit negotiations and other factors influencing the Euro, UK travellers, in particular, have reduced their European spend in the last few years. Instead, UK travellers are spending more in locations like Turkey or Argentina where their funds can go further.

Travellers heading abroad will ultimately have to convert their funds into the currency of their chosen destination so to enjoy hotels, restaurants and other attractions. This means that for UK travellers, if the Pound is a favourable position, you can enjoy more of the good parts of travel as the rates will provide more from the conversion. Conversely, if the Pound depreciates against popular currencies like the Euro, many travellers may be more inclined to shift away from those markets and towards more exotic locations instead.

Hamish Muress, Senior Currency Strategist at OFX explains that by asking yourself how much a pint would cost in pounds in various places around the world, you can better understand how much you’d receive in the currency conversion. Keep in mind that a pint in London costs around £5.

“The cost of a pint in Norway, for example, means you’d get 65% less in the exchange, whereas a pint in Thailand means you’d receive 54% more comparative to the Pound. It’s these factors that are likely to influence where many UK travellers are planning their next trip in the future.”

How can you protect your travel money from exchange rate fluctuations?

Along with carefully choosing the location for your next trip, Muress recommends three tips for managing currency fluctuations.

  • Stay on top of events that drive currency shifts.
  • Take advantage of favourable market movements in the face of geopolitical events.
  • Don’t leave things to chance – proactively prepare for the unexpected.

Using tools like rate alerts which allow services like OFX to monitor the markets for favourable exchange rates, or signing up for market news when deciding what locations would provide the best conversion rates are a great wat to prepare for fluctuations. Understanding the not-so sexy parts of overseas travel means you can get back to the fun parts of planning your next adventure.

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