Financial markets can feel distant from everyday concerns of an average household or business, but there is one aspect of it that almost everyone is familiar with: currencies and foreign exchange (FX).

Even people who are not directly involved with trading on the financial markets often find themselves in a situation where they need to exchange one foreign currency into another. There is a multitude of very common situations where having foreign banknotes can be a necessity, for example:

• Travelling on holiday
• Funding a purchase of an imported car, or
• Buying a retirement property overseas

In many situations, people can acquire spending money by simply visiting a retail bank in the country they are visiting, but that is not always an optimal solution.

While using a bank can be sufficient in case of small amounts of cash, converting large sums of money requires preparation, knowledge of FX rates, and understanding of transaction fees and bank transfer rules.

Furthermore, British businesses are increasingly international and need to navigate the complex waters of global payment systems to cover outstanding invoices and safeguard the value of their overseas assets.

People who are faced with these tasks often struggle with managing their FX transactions while running a busy business or a household at the same time.

While retails banks have served a central role in converting currency in the past, nowadays people are increasingly turning to specialist providers to manage their FX requirements.

Here are some of the typical questions people ask themselves:

• “Which currency do I need for my purchase?”
• “When can I get a better exchange rate?”
• “How do I manage transaction fees?”
• “Can I protect my business from FX volatility?”

These and other concerns give rise to a demand for a comprehensive support structure that can cater to people’s specific FX needs.

Spring Bounce

Many foreign currency traders believe that FX markets are subject not just to macroeconomic forces, but also to certain seasonal patterns that can be studied and harnessed to secure a better deal.

There is often a discussion about a so-called Spring Bounce, a pattern in FX trading that suggests that the second quarter (Q2) of the calendar year (April to June) sees an increase in FX trading and a stronger Pound.

If a Spring Bounce truly exists, then understanding this pattern and being prepared to take advantage of it can be a way for FX traders to secure favourable rates in anticipation of future foreign currency needs.

Making a large-scale purchase, whether at home or overseas, is an important financial investment, and a smart investor is, first and foremost, an informed investor. That means understanding how the FX markets work, who sets the FX rate, what causes the FX rate to fluctuate, and how to take advantage of FX rate changes to save money and have a more financially-rewarding investment.

Read on to find out more about the key factors influencing FX markets.