Hi Jeremy, and welcome on board. Tell us a bit about yourself.
Jeremy: I’m Jeremy Cook, and I’m the Chief Economist at World First. We are one of the UK’s leading currency brokers. We help people and businesses convert currency quickly and safely around the world, and we help them protect themselves from foreign exchange risk. We’re, based in Battersea. I may be biased in saying this, but I think we’re the best at what we do!
What exactly is the foreign exchange market?
Jeremy: It’s the largest financial market in the world with around $4trn (or the value of the UK economy) traded every day. Most of this is made up by traders looking to profit from movements in currency rates, but it was, of course, born as a necessity to international trade. It is truly the market that never sleeps, as it opens at 8pm UK time on Sunday night in New Zealand and closes at 10pm on Friday when New York turns out the lights.
What are the main trends happening right now?
Jeremy: We are starting to see a return to currencies trading around their interest rate differentials (i.e., the difference in interest rates between two competing currencies, with one being looked at more favourably than the other). This is the main reason for the US dollar’s weakness and the Euro’s strength, in spite of the issues surrounding the debt levels of some of its peripheral nations.
At what point in business life taking an expert approach to exchange rates becomes important?
Jeremy: I think as soon you realise that your business will be dealing internationally, thus exposing you to exchange rate fluctuations. It’s never too early to speak to an expert, and I know that some people feel daunted by the prospect, but they shouldn’t. Certainly, the service levels at World First are geared to making everything as simple as possible regardless of your market experience.
What are the most important things to know when dealing with sales abroad and currency issues?
Jeremy: It’s important that you know about budget rates and looks at hedging appropriately. You can make all the sales in the world, but if you’re losing 5% in the currency markets because you haven’t hedged yourself, then your margins could be wiped out. I would say this is the most common mistake that we come across when speaking to new clients.
What exactly does World First do in this ecosystem?
Jeremy: World First was the first broker in the UK to provide options structures to the nation’s small and medium-sized businesses. These structures provide the client with all the security of hedging via a standard forward contract whilst still allowing the freedom of spot rates if the currency markets move in your favour. We’ve certainly seen a lot of clients benefit from these products in the volatile markets since 2009.
What are the main benefits of using your services?
Jeremy: We pride ourselves on being the best in everything we do, so you’re always going to get immaculate service, a great price, and the knowledge of the professionals. We’ll also make sure the money arrives in the destination account as soon as possible.
Any notable transactions or customers you would like to mention?
Jeremy: I can’t go into specific company details, but we provide our services to a fair few household names in the food, fashion, travel, and pharmaceutical industries.
What’s the typical type of client that requires your services? Are there any size requirements?
Jeremy: There’s no typical business, but I would say the average company is someone who imports around £2m of goods from Europe or the US and needs to pay various suppliers on a monthly basis.
And how exactly does everything go?
Jeremy: We make the process simple. Once registered, you would be assigned a dedicated dealer who would look after your account from day one. As and when you need to make your first payment, he or she would take you through the process of booking a rate, and then you would send the funds to us to settle the outgoing payment. Once that’s with us, we send your payment out as quickly as possible. Most payments arrive on the same day.
What are the typical things that can be improved with your expertise?
Jeremy: We can improve the price that you receive so your dealings are cheaper, your service so that the process is easier, and the speed of the transfer, so your relationship with your suppliers is always tip-top.
How did the crisis affect the exchange market?
Jeremy: We saw a ‘flight to safety with market participants moving their money to the so-called ‘haven’ currencies such as the US dollar, Swiss Franc, and Japanese Yen. They rose to multi-year highs on this strength, with GBP, unfortunately, being one that was unable to benefit with it losing around 30% of its value vs. the dollar in the space of 1 year.
Can you also make transactions for a profit? How is it different from, say, the stock exchange?
Jeremy: You can do, and we advise that anyone looking to do so educate themselves about the pitfalls before jumping in. The FX markets are a lot more volatile than your average stock market, so an ill-prepared speculator can swiftly be taught a lesson by a market movement.
Any advice for business thinking to export?
Jeremy: Go for it; the UK economy needs it! I would say that this is a great time to be a UK exporter as the government is trying to rebalance the economy to increase the manufacturing base, and therefore tax breaks or grants may be available to new starters. The weak pound will also make your goods look attractive to foreign buyers.
Where can people find out more about the current market exchange news?
Jeremy: I write a daily email to all our clients in the mornings summarising the past 24hr’s market movements and what we expect to happen in the day ahead. You can also see a lot more and our video blogs and presentations on the World First blog at www.worldfirst.com/blog.