Is the weak Euro lowering your profits?
Speaking to Deepak Goyal of Currencies Direct at IRX today, he highlighted how the weakness of the Euro is negatively impacting retailers.
The euro has dropped by over 10% against the dollar and by around 7% against Sterling. Online retailers are being squeezed on both sides, as imports from the US and China become more expensive and euro sales equate to fewer pounds back in the bank.
Deepak says that the downward trend for the euro is widely expected to continue. Analysts predict that the euro will break past parity with the US dollar and plummet to lows not seen since late 2002. At the same time while the US economy will continue to grow, and a potential interest rate rise remains on the horizon, if the US dollar remains strong the Fed may be forced to devalue it through monetary policy action.
If you are finding profits diminishing because of unfavourable exchange rates, there are solutions you can use to help reduce losses and lessen the impact of volatile currency rates on your business. Forward contracts let you reserve a rate you’d like to use for a future transaction, so you can plan ahead for upcoming transfers. This gives you the opportunity to lock in current exchange rates and create certainty in your Sterling equivalent of import price and euro sales.
This can be valuable when for instance you place an order today for which payment will be due on shipment in a couple of months time. You can lock in the exchange rate for a future date, giving you a certainty of cost regardless what happens with exchange rates in the interim.
Also don’t forget that companies like Currencies Direct can also save you around 2% on all your EU marketplace. Using their e-tailer Collection Account will give you a better exchange rate on overseas sales than if you allow the marketplace to use their default exchange rate.