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Weak euro affects online sellers


The theme of this year has been the slide of the euro against the US dollar and the British pound. Europe’s ailing economy has been battered by deflationary risks and lacklustre growth, which forced the European Central Bank (ECB) to start a monetary stimulus scheme on 9 March. 
 
As a result, the euro dropped by more than 10% against the dollar and by around 7% against Sterling.
 
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Online retailers (etailers) are being squeezed on both sides, as imports from the US and China become more expensive and euro sales equate to fewer pounds in the bank. The tough environment means you need to make the most of every penny and think carefully about where – and for how much – you buy and sell.

The causes

Pressure from the ongoing Greek debt saga, that first surfaced around five years ago, is building. Greece’s membership of the EU has been uncertain for some time and that has affected investor confidence. 
 
There’s a one in four chance that Greece will exit the Eurozone in six months’ time, says investment bank Morgan Stanley. Even in Germany, the most successful economy in the EU, investor confidence has failed to regain the highs of early 2014.
 
Europe’s economic recovery has not matched those of its counterparts in the US and the UK, with the ECB starting its quantitative easing strategy more than six years after the Bank of England and US Federal Reserve began their own programmes.
 
The strength of the UK and US recoveries are creating difficult conditions for international sellers, so planning is crucial to success. Sellers should keep their foreign pricing up to date, and give extra consideration to the adjustment of euro pricing on German and French marketplaces to remain competitive against local European vendors.
 
What can we expect?
 
The downward trend for the euro is widely expected to continue. Analysts predict that the euro will break past parity with the US dollar and plummet to lows not seen since late 2002.
 
The Greenback’s stellar performance could be unsustainable, especially since it’s making it hard for US businesses to maintain their former profit levels. While the US economy will continue to grow, and a potential interest rate rise remains on the horizon, if the US dollar remains strong the Fed may be forced to devalue it through monetary policy action.
 
There are many factors that could affect businesses in the UK and EU, but making sure you manage currency fluctuations is a priority.
 
What can you do?
 
Online retailers can find themselves shedding profits because of unfavourable exchange rates, but there are immediate solutions you can use to help reduce losses.
 
Simple tools and products can lessen the impact of volatile currency rates on your business. Forward contracts let you reserve a rate you’d like to use for a future transaction, so you can plan ahead for upcoming transfers. This gives you the opportunity to lock in current exchange rates and create certainty in your Sterling equivalent of import price and euro sales.
 
International marketplace sales that are currently received directly from marketplaces into your Sterling bank account are another opportunity to create efficiency. A specialist e-tailer Collection Account will enable you to get 2% more profit back on sales by giving you a better exchange rate on overseas marketplace sales. If you have the luxury of time, further savings can also be achieved by timing your currency conversion to happen when the rates are in your favour.
 
Rate Watch means you'll be contacted when the currencies you're interested in reach the trigger rates you have identified while limit orders allow you to make your transaction when the rate suits you. They are handled by experienced brokers over the phone to provide you with expert support.
 
At Currencies Direct we take the time to evaluate your business in order to understand its processes and objectives, and what primary benefits your online business can gain from foreign exchange services. 
 
Our ecommerce specialists have the experience, knowledge, and correct tools to best protect your business from the inherent currency risks.
 
Book a 60-minute free consultation with an e-tailer currency expert today.
 
E [email protected]
P +44 (0) 20 7847 9269
W currenciesdirect.com/etailers




 

 
 

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