Nobody can accurately predict future exchange rates consistently and people should be very wary of dealers who claim they can. While keeping in touch with exchange rate fluctuations is important, most people will be better served making sure they are getting a competitive customer rate and understanding how they can minimise the impact of adverse exchange rate movements on their funds transfer.

For those who like to follow the markets and understand what is causing trends and volatility in exchange rates, some of the key factors that can have significant impact on exchange rates are:

• The release of economic data such as gross domestic product (GDP), inflation and unemployment
• Changes to a country’s fiscal policy
• Large capital flows as fund managers move assets between global markets
• Changes to interest rate differentials between countries
• Trends in other asset classes such as commodities, equities and bonds
• Geo-political events that increase or decrease a country’s risk in the eyes of investors

It may also be useful to monitor currency charts to familiarise yourself with the history of an exchange rate and understand its historical volatility. In-depth analysis of charts and price history is called technical analysis and is a popular approach to timing exchange rate transactions.

There is plenty of information available on the internet to help aid your understanding of rate fluctuations but this can be overwhelming for many. By speaking to an accredited foreign exchange dealer, however they may be able to help you remain aware of developments affecting exchange rate fluctuations, in plain English, which should help solidify your decision making process.

• Article supplied by UK Forex