If you want the best exchange rate for your international money transfer to the UK, find out about the factors that affect the value of the GBP.
If you want value for money when you send money to the UK, you’ll need to find the best exchange rate. However, to do that you will need to not only compare money transfer providers, but also look at the history and performance of the GBP.
Once you understand all the factors that affect the AUD/GBP exchange rate and can predict how it will fluctuate in the future, you can find a better deal for your international money transfer.
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History of the GBP
The oldest currency in continual circulation today, the pound sterling or British pound (GBP) is the official currency of the United Kingdom. It is also used in Jersey, Guernsey, the Isle of Man, South Georgia and the South Sandwich Islands, the British Antarctic Territory and Tristan da Cunha, and most refer to the monetary unit as simply “the pound”.
For the better part of its history, the currency of England was based on the weight of its coins. However, by the time England entered into the American War for Independence and the Napoleonic wars, banknotes were legal tender with their value floated in relation to gold.
By 1816 the United Kingdom officially adopted the gold standard, allowing conversion rates to be easily determined. This meant that by the start of the 20th century, the GBP was equal to 4.85 US dollars, 5.25 Canadian dollars and 23.10 Dutch guilders.
During the early part of the 20th century, the United Kingdom had one of the strongest economies in the world with close to half of the planet’s overseas investments. However, the two World Wars had a significant impact on the UK’s economy and in 1940 the GBP was pegged to the US dollar (USD) at a rate of 1 pound for 4.03 USD. This was a drop from the US$4.86 that had been the value just one year before.
With the UK still struggling economically, the pound was devalued twice again, first in 1949 to US$2.80 and then in 1967 to US$2.40. Finally, in 1971 the value of the pound was floated, allowing it to compete with other currencies based solely on its strength and buying power.
Throughout the 1970s and 1980s, the value of the GBP rose and fell with the UK economy. In 1979 it was on the rise, valued at US$2.40, but dropped sharply to US$1.03 in 1985 before showing some growth and reaching US$1.70 in value in 1989. Despite its fluctuations, the government of the United Kingdom chose not to join the rest of Europe in adopting the euro as their new official currency in 1999, a decision which saw the UK forfeit its position as having one of the top three dominant currencies in the world.
GBP exchange rates
The pound sterling falls fourth in line as one of the world’s most traded currencies and is the third most held currency in reserve around the globe. The United Kingdom is one of just a few European nations that chose not to make the change to the euro in 1999. As a result, the British pound lost its footing in the currency exchange market and now typically falls behind the US dollar, euro and Japanese yen in lists of the world’s most traded currencies.
Since the introduction of the Australian dollar (AUD), the GBP has always traded strongly against it. In the 10 years to November 2016, for example, 1 GBP has traded at a rate of between 1.67 and 2.64 AUD.
In fact, the GBP has traditionally held a strong value against most other major global currencies throughout its history. The 2008 economic crisis that began in the United States allowed the GBP to reach one if its highest points in recent history, breaking the US$2.00 mark briefly in 2007.
After this surge, the value of the GBP fell at one of its fastest rates in history, dropping to US$1.38 by the beginning of 2009. It rose slightly after that period as the economy in the UK and around the world slowly improved.
However, the June 2016 Brexit vote saw a sharp drop in the value of the GBP amid increased uncertainty about the UK’s economic future.
The table below outlines the performance of the GBP relative to a number of other currencies in the past decade.
|January 2006||January 2011||January 2016|
Factors that affect the value of the GBP
Exchange rates are complicated. There are myriad of competing factors that can have an impact on the value of a country’s currency, ranging from its overall economic performance to interest rate changes, currency supply and demand, and even national elections.
Factors to keep an eye on include:
- Whether the Bank of England increases or drops interest rates. When interest rates rise, the GBP exchange rate rises.
- Inflation. Countries with higher inflation than others will see the value of their currency drop.
- Consumer confidence and sentiment. There are many surveys that assess how people are feeling about the economy, which in turn has an effect on economic growth.
- Growth. The overall amount of economic activity, including the gross domestic product and other economic indicators, can drive exchange rates up or down.
One recent example of a noticeable change in the value of the GBP occurred in June 2016, when the Brexit poll saw UK citizens vote to leave the European Union. The uncertainty surrounding the poll result saw the GBP drop from a value of 1.49 USD on 23 June to 1.28 USD by 6 July.
Of course, when deciding on the right time to send money to the UK from Australia, you not only need to assess the performance of the GBP but also the value of the AUD. This will help you develop a better idea of what influences the AUD/GBP exchange rate and in which direction it is headed.
When is the best time to transfer money to the UK?
The ideal time to transfer money to the UK is whenever the AUD/GBP exchange rate is at its highest. This means you need to send your money at a time when the AUD is performing strongly against the GBP.
However, because there are many factors that can drive an exchange rate up or down, it can be very difficult to forecast what the value of any particular currency is going to do in the future.
Of course, you can take steps to help ensure that you know when is the best time to transfer AUD to GBP. By keeping track of economic and political developments in Australia and the UK, as well as staying up to date with financial news in both countries, you’ll be well placed to take advantage of any movements in the exchange rate. You can also research AUD/GBP exchange rate predictions from economists and financial organisations around the world.
Another very useful tool to help you find the best time to transfer to GBP is to examine the historical performance of the AUD/GBP exchange rate. This information is readily available on trusted currency conversion websites like xe.com, and you can quickly look back at the past 10 years of the AUD/GBP rate. This will help you understand just how far the rate can rise or fall in a short period of time, as well as the myriad factors that can affect the value of the GBP.
As the chart of the AUD/GBP exchange rate below shows, the best times to transfer AUD to GBP in the year preceding 28 November 2016 were:
- In July 2016, when 1 AUD = 0.58 GBP
- In August 2016, when 1 AUD = 0.59 GBP
- In October 2016, when 1 AUD = 062 GBP
On the other side of the coin, the worst times to send money to the UK were from December 2015 to February 2016, when 1 AUD traded between 0.47 and 0.49 GBP, and when 1 AUD dropped to 0.49 GBP in late May.
* Screenshot taken from xe.com on 28/11/2016
Case study: How to time your transfer
Jim is a UK expat living and working in Australia. He’s spent the past few years slowly working off a debt he owes to his parents, who helped him buy his first car. He now owes just £1,000 and with no time limit on when he has to repay this outstanding amount, Jim decides to wait for the best AUD/GBP exchange rate to become available.
At first Jim wants to send the transfer in January 2016, when 1 AUD is worth 0.47 GBP, but a look back at the history of the AUD/GBP exchange rate tells him this is the lowest the rate has been since early 2009. He decides to wait a few months until April, when the AUD/GBP exchange rate has risen to 1 AUD = 0.54 GBP.
However, while this represents a much better deal, Jim will find superior value for money if he waits until August (when 1 AUD = 0.59 GBP) or October (when 1 AUD = 0.62 GBP).
Simply by sending the transfer in October instead of January, Jim can save a whopping AUD$515 – but still send the GBP necessary to pay off his debt.
|January 2016||April 2016||August 2016||October 2016|
|Exchange rate||1 AUD = 0.47 GBP||1 AUD = 0.54 GBP||1 AUD = 0.59 GBP||1 AUD = 0.62 GBP|
|AUD needed to transfer £1,000||$2,128||$1,852||$1,695||$1,613|
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The importance of choosing the right money transfer provider
Once you’ve found the right time to send an international money transfer to the UK, you then need to find the right transfer provider to manage your transaction. This will help you lock down the best exchange rate available and enjoy even further savings.
But is it really worth taking the time to compare money transfer providers? Yes, because money transfer providers have to make a profit, and the way they do that will affect how much your transfer costs.
There are two factors to consider when determining the total cost of your GBP transfer:
The transfer fee
This could be calculated as a small percentage of your total transaction amount, or simply charged as a flat fee.
The exchange rate margin
Money transfer providers make a profit on the margin they add to foreign currency. For example, if a bank purchases GBP at a rate of 1 AUD = 0.60 GBP, it might then sell it on to you at a rate of 1 AUD = 0.56 GBP.
The fees and exchange rate margins vary between each money transfer company, so it’s vital that you compare money transfer providers to lock in the best deal.
Case study: Bill sends money to the UK
Bill and his wife Jan moved to Australia from Wales to retire several years ago. They love their new life down under, but they still maintain strong ties with their relatives back in the UK.
Bill wants to send AUD$1,000 to their London-based granddaughter, Natasha, as a birthday present. In the past he has sent his international transfers from his account with a “Big Four” Australian bank, but he decides to compare his options to see if he can find better value for money.
Bill compares the cost of sending a transfer via his bank with the cost of sending the same amount of money with a cash transfer provider and two online money transfer companies. As the table below shows, by using money transfer company 2 instead of his bank Bill can save $15 in transfer fees and send an extra £33.50 to his granddaughter.
|Bank||Cash transfer company||Money transfer company 1||Money transfer company 2|
|Exchange rate||1 AUD = 0.5632 GBP||1 AUD = 0.559260 GBP||1 AUD = 0.59 GBP||1 AUD = 0.5967 GBP|
|Amount sent (in AUD)||$1,000||$1,000||$1,000||$1,000|
|Total cost of transfer (in AUD)||$1,022||$1,065||$1,004||$1,007|
|Amount received (in GBP)||£563.20||£559.26||£590||£596.70|
International money transfer options
There are four main choices when you want to send a GBP international money transfer:
It’s simple and convenient to send a transfer from your Australian bank account, but banks tend to offer very disappointing exchange rates and also charge fees of $15 or more per transfer.
Cash transfer companies like Moneygram and Western Union are ideal if you want to send cash and you want to send it fast, with transfers to hundreds of thousands of worldwide locations able to be sent within minutes. However, their transfer fees can be higher and you can often find better exchange rates online.
Specialist online transfer providers, such as TransferWise and WorldFirst, usually offer the best exchange rates and lowest fees. They offer safe, secure and convenient online transactions, and typically also offer the best value for money.
PayPal’s international money transfer service is a handy and convenient way to send money overseas. However, its fee structure means it is a costly option for all but small transfer amounts.
How to compare money transfer providers
If you want to send AUD to GBP, consider the following factors to help you choose the best transfer company:
It’s crucial to find the best exchange rate if you want value for money. Compare AUD/GBP exchange rates between transfer providers but remember that some companies with high exchange rates may also charge high fees.
Transfer fees can make or break the affordability of a transaction. Fees range from a few bucks through to $70 or $80, so it’s important to shop around for a provider with minimal additional charges. Some companies even waive their fees when you send a large transfer, for example $10,000 or more.
Sending and receiving options
Will you be able to send a transfer online, over the phone, in a branch and/or through a smartphone app? Also check whether the funds will be available for cash collection or simply sent straight to your recipient’s bank account.
Some people will only ever need to send one-off transfers but others can benefit from flexible options such as:
- Scheduling recurring payments when you need to send regular transfers
- Placing forward contracts to lock in an exchange rate today for a transaction that will take place in the future
- Placing limit orders to automatically send a transfer when the exchange rate you want becomes available
If you ever have trouble with a transaction or have a question about a transfer, check to find out if you will be able to access the help you need. As well as online help centres and FAQ sections, the provider may also offer phone, live chat and email support.