Hi, for context, I’ll be in the UK in a couple of months and I need to order some GBP before I leave. The exchange rate right now is 1.2787 GBP/USD but I don’t understand what that means exactly. Does that mean the GBP is worth more? This rate seems higher than normal, is this a good time to exchange? Or do I have it opposite and I should wait?
In: Economics
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Exchange rates are generally based on market data.
If the exchange rate “right now” is 1.2787 GBP/USD that means, on average, traders are buying British Pounds for $1.2787 each.
i.e. if you have 1 GBP and want to sell it in USD, someone might buy it from you for $1.2787.
In practice, sellers available to you as a consumer are likely to charge a fee, so they will probably buy it from you for a lower price, maybe $1.25.
You can work out the exchange rate the other way by doing “one divided by” that number. 1/1.2787 = 0.7820.
That means that if you have 1 USD and want to sell it in GBP, someone might buy your dollar for £0.7820. But again, in practice they will probably pay a bit less, maybe as low as £0.76.
If you are only buying a small amount of GBP I wouldn’t worry too much about the changes in the exchange rate. The rate does seem to be going in the favour of GBP at the moment (so you are getting fewer £s for your $), but that may be because the UK had a big financial event this week (a budget statement). So maybe you would be better buying sooner than later. On the other hand, this might just be a spike due to the budget yesterday, so maybe it will drop down next week and you are better buying later?
There are people who make their money from currency trading; buying when the exchange rate is favourable one way, then selling when it shifts the other way. Unless you have large amounts involved and are willing to do a lot of work, you’ll probably not get much out of this.
For context, in the last month the exchange rate [according to Xe](https://www.xe.com/currencycharts/?from=GBP&to=USD&view=1M) has been between 1.25401 and 1.27963. So that’s a difference of about 2.5 cents per pound. But both those numbers are within the range currency traders will offer anyway; you are probably going to get a better deal by shopping around between traders rather than trying to game the market to buy at the best time.
But don’t take financial advice from strangers on the Internet.
A bit off-topic, but you likely don’t need cash at all if you’re visiting the UK. I used tap to pay for everything there. Just ensure you’re using a card without a foreign transaction fee, and decline any offer of the payment terminal to process the payment in dollars: your bank will give you a better exchange rate when the payment is processed as GBP by them.
If you did want to get cash, you can get a better exchange rate by just withdrawing GBP from an ATM when you arrive.
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Nobody can predict how the exchange rate will shift over the next couple of months, and you’re likely not talking about that much money in the scheme of things… a few GBP unless you’re exchanging tens of thousands of dollars. You really don’t want to exchange too much money before you go for security purposes and because you can typically use credit/debit cards.
It means that 1gbp will get you 1.28 usd.
It doesn’t really mean that gbp is worth more. If a burger costs 1.28usd in America and 1 pound in UK. It’s effectively the same price
I wouldn’t really bother waiting for a better price to exchange. Since it could get more expensive and at most you are only saving maybe $0.1/pound (depending how much you exchange ofc)
But if you do want to save them place an order in the bank and wait to see if they sell at that price
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