Author Topic: GBP/USD medium term?  (Read 1382 times)

FIREman2036

  • 5 O'Clock Shadow
  • *
  • Posts: 31
GBP/USD medium term?
« on: May 22, 2014, 06:07:43 AM »
I was hoping to get a bit of advice on the GBP/USD exchange rate. I have about $8500 in stocks in USD for a company that i left this year and i am looking to sell to close my exchange risk. I have already seen a fair bit of the gains from these stocks erroded by the weakening of the USD over the last 18 months.

Im worried that the forcast for the USD against the GBP doesnt look to good for the medium term even though i feel the stock is undervalued right now by possibly up to 5%.

Are there any forex traders out there with some advice?       

warfreak2

  • Handlebar Stache
  • *****
  • Posts: 1140
  • Location: UK
    • Music by me
Re: GBP/USD medium term?
« Reply #1 on: May 22, 2014, 06:58:34 AM »
If you want to reduce your exchange rate risk but still hold onto the stocks, you could take out a forward exchange contract in which you agree to exchange USD for GBP at a fixed exchange rate in the future. You can also use options, which mean you aren't obligated to exchange all of the USD if your stocks don't perform well (or the exchange rate becomes more favourable), or European-style options which also mean you can execute the exchange at any time during an agreed interval, rather than at a fixed date. (Obviously you would have to pay a premium for those extra privileges.)

FIREman2036

  • 5 O'Clock Shadow
  • *
  • Posts: 31
Re: GBP/USD medium term?
« Reply #2 on: May 22, 2014, 07:18:05 AM »
Thanks for the info Warfreak, ill definitley look into this . As well as this stock issue, I currently earn and live in the eurozone but with most of my assets in GBP so this could help me offset some risk until i decide where to settle down.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: GBP/USD medium term?
« Reply #3 on: May 22, 2014, 07:30:23 AM »
The trend in GBP/USD is up but there's no way to know how long it will persist. Forget any forcasts you've seen, nobody knows what it will do 6 months from now. You'll have a 50/50 chance of being right if you decide to sell/hedge now or later.