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How Do You Read The Foreign Exchange Rates?

By Peter Lavelle

If you plan to exchange currencies, one of the things you may want to do before making the transfer is checking the foreign exchange rates for yourself. For this, sites such as Google Finance and even the BBC are invaluable.

But if you do so, how do you read the foreign exchange rates? How do you tell if the pound is higher against the euro, or even which one the pound is? In this article, I want to tell you how to read the foreign exchange rates. This should (hopefully) put you in a stronger position the next time you plan to change currencies.

Foreign exchange example: pounds to euros

Imagine for instance that you want to buy euros. You’re in the UK, so start with pounds sterling. How do you read the foreign exchange rate? Well, if you went to a bureaux de change, or Google Finance as I mentioned above, to sell pounds and buy euros you would be met with the following:

GBP/EUR: 1.2612

Here, GBP/EUR refers to the currencies involved in the transaction. ‘GBP’ is the currency code for the pound, standing (of course) for ‘Great British Pound.’ EUR meanwhile is the currency code for the euro, and that’s just an abbreviated form of the word ‘euro.’

It looks like GBP/EUR meanwhile because you want to sell pounds to buy euros: the transaction therefore starts with pounds and ends with euros, going from left to right.

The number meanwhile is the rate at which the pound is selling for the euro. It means that, for each one UK pound you have, 1.2612 euros is available. The rate of course constantly changes, depending on what economic data’s available at the time, sentiment on the market, and that can make the pound stronger or weaker against the euro.

Look out for the interbank foreign exchange rate

In addition it’s important to note that, depending on where you read the exchange rate, the rate you see may not be the rate you get. This is because there’s something called the ‘interbank rate,’ which is the rate at which high street banks lend billions to each other on an hourly basis.

Individuals hoping to change currencies can’t get this rate, so it’s important to check whether the rate you’re seeing is the ‘interbank rate,’ or the rate actually available to you. There should be some indication of this.

That then is how you read the exchange rate! Of course, if you don’t want to buy or sell pounds and euros, you might be interested in other international currency codes, such as USD (US dollar) and CHF (Swiss franc.) These are available here.

Get in touch

I do hope this post has been of interest.

To find out how this data has affected your foreign exchange transactions, call us on +44 (0) 1494 671800 or email [email protected]. You can also visit us at foreign exchange specialist Pure FX. We’d be delighted to help with your enquiry.

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