FX Services For SME’s and Individuals (The pitfalls to trading internationally)

ParityFX Plc is a financial services company that focuses primarily on executing currency transactions,  providing structured FX solutions and currency advice to SME’s, Large Caps and individuals. We aim to:

(1) Provide first class currency execution.

(2) Improve hedging efficiency and timing.

(3) Enhance treasury decision making:  lowering net interest expense; and reducing the volatility of your currency exposures.

(4) Provide a traders’ insight into the macro-economic landscape particularly where currencies are concerned.


Why Choose ParityFX

Over 40 years experience: Having a combined 40 years experience of trading currency and fixed income products, the founders of ParityFX have an extensive network of relationships in the financial community from which to leverage information. As a client you will get more than great execution, you will be provided with an insight into how FX markets are positioned and the key drivers that could impact your currency exposure. At ParityFX you won’t just be confronted with a web-interface or inexperienced staff handling your business. Our priority is to understand your needs and help make your exposure to the currency markets work to your advantage. Tailored Products: We offer a product tailored to your needs. If your business requires timely execution, we will provide it. However there are circumstances when immediate execution may not be optimal. Our knowledge of currency markets are a great asset to you, as our client, and we can assist your company in determining the optimal timing for FX execution. Our aim is to help you make the currency markets work for you. Financial Savings: Do not under-estimate the savings you can make.

Our execution can save you several percentage points relative to what you get from banks (and other MSB’s). But the potential for savings is greater. As a client you can make savings if you time your trades correctly to take advantage of volatile markets. You can make savings from adjusting your exposure to adverse moves that could impact the valuations of your foreign holdings. Over the financial year partnering with ParityFX can accumulate savings that will substantially impact your bottom line, and afford you greater control of your risk.

Foreign Exchange markets are exceptionally volatile as any business in the import/export business will tell you. Only recently Coca Cola and Procter and Gamble recently announced that the strong USD has weighed heavily on their earnings. In fact P&G noted that exposure to FX is expected to REDUCE sales growth by 2-3% for the year. That is a real loss (rather than an opportunity loss) and one that could have been avoided. FX risk management is a reality that cannot be ignored. This is especially true for companies like P&G and Coke in today’s globalised business market and volatile foreign exchange rates.

For any company that trades goods and services internationally, managing foreign exchange is not just prudent, it is necessary. There are a variety of methods businesses can use to limit currency risk; (1) Currency Forwards, (2) Currency Options and (3) Interest Rate Currency Swaps. Options (2) and (3) can be complicated and are leveraged meaning your losses can be exponential. For a company that relies on being financially prudent, I would suggest that unless you fully understand how these instruments work, you should stay away from them. Having said that, if you BUY a currency option your losses (if there are any) are limited to the amount of premium you spent to buy the option, however if you sell an option your losses can be unlimited.

That leaves companies with only 1 option, and that is using FX Forwards. They are easy to use and understand. Simply put, if you buy a forward outright the rate you set at the beginning is the rate you exchange your currency at on settlement date. So if you buy GBP against USD for say 28 November at 1.5997 (spot currently1.5998) then come the 28 November you will sell your USD and buy your GBP at 1.5997 (i.e., $100,000 = £62,511.72). If for example the inter-bank spot market for GBPUSD on the 28th Nov. is 1.6100 you will have made an opportunity profit of £399.92 ($100,000 x 1.6100=£62,111.80) because you had bought your GBP at 1.5997 rather than on the day at 1.6100. The opposite holds true if the inter-bank FX rate for GBPUSD was 1.5900 on settlement date. In this case you will have made an opportunity loss of £381.36 ($100,000 x 1.5900 = £62,893.08) because instead of buying at 1.5900 on the 28th Nov, you are buying your GBP at 1.5997. In other words, a FX forward is a contractual agreement to buy or sell currency at a FIXED RATE on a FIXED DATE.

Despite having a fixed FX forward contract you are still able to “unwind” this contract at any time before the settlement date, AND also “draw down” on your funds. In other words if you fixed the contract to SELL USD ($100,000) Ag BUY GBP for the 28th Nov. and say on the 14th Nov. you needed to sell $50,000 of the total that is entirely possible. By drawing down early it means that on final settlement the 28th Nov. you will only have remaining $50,000 to execute.

As your business grows and you become more and more global you MUST take care to factor in all the necessary risks of globalisation. FX risk as I mentioned above is one of those factors. So what are the things you should consider when dealing in FX? (1) The interest rate deferential between the 2 currencies, (2) the currencies volatility, (3) Fundamental risks (Earthquakes, floods, hurricanes, inflation, unemployment and war), (4) Economic risks (CPI, GDP, PMI, Retail Sales, Interest Rate decisions, (5) Commissions and costs related to transfer of funds, and most importantly (6) the FX rate itself. So many people through no fault of their own, simply ignore these issues to their detriment.

There will always be pitfalls when trading internationally. It is the fact of doing business globally that means you will be subject to the volatilities encountered in the FX markets. No business is immune to currency fluctuations (up or down). However as long as you are able to take the necessary steps to manage your exposure to foreign exchange markets, the volatility can be mitigated and even work to your benefit.

ParityFX charges NO commissions or fees when transacting FX on behalf of our clients. There are no hidden charges OR funny rates. It is really quite simple, we will provide you with a competitive foreign exchange rate quote at which your money can be converted. That is all there is to do!  We do not deal in “cash/notes” like a Bureau de Change, transactions are electronic, and we will make payments, for you, to your suppliers (or yourself) on your instruction.

ParityFX ALSO offers the ability to RECEIVE 3rd Party Payments. This is particularly useful if you sell your products on websites like AMAZON, eBay, ALIBABA etc. Instead of your revenues being converted back into pound sterling at punitive rates with limited transparency, we can receive your foreign currency earnings on your behalf, convert them at a competitive exchange rate and remit the funds directly to your bank account.

ParityFX also writes a DAILY FX COMMENTARY which our customers find incredibly useful. While banks often provide this service, a large percentage of SME’s are not able to access the publications as those commentaries are generally restricted to the large corporate who trades large amounts with the bank. Feel free to check out the blog directly www.blog.parityfx.com or alternatively you can access this information through our website address which is www.parityfx.com

Should you wish to discuss any of the above in more detail please feel free to call ParityFX on telephone number 0207 112 1530 

Alternatively you can write to me at david.rosenberg@parityfx.com

I hope this information helps to develop the best strategy for managing your foreign exchange needs.



Any financial promotion contained herein has been issued and approved by ParityFX Plc (“ParityFX”); a firm authorised and regulated by the Financial Conduct Authority (“FCA”) as a Payment Services Institution with registration number 606416.  It is for informational purposes and is not an official confirmation of terms.  It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to.

Opinions expressed are subject to change without notice and may differ or be contrary to the opinions or recommendations of ParityFX. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, ParityFX does not accept any liability arising from the use of this communication.


Good morning

Of all the comments made by ParityFX over the past few months, the one that has stood the test of time and been confirmed over and over again has been the prediction and thoughts regarding the USD. Since June/July this year when we started on this BUY THE USD journey, the market has been hell bent on driving this trend. We have seen some degree of consolidation and pull back recently (EUR pushed up to 1.2760), but that all came to an abrupt end last Wednesday evening when the FED officially ended QE (3). Since then the EURUSD has been as low as 1.2446 and as much as I try to find reasons to the contrary, it appears that the USD is now on the next LEG of its monumental journey. As you have read over and over again in this blog, my target for 31 December was 1.2000 (I did change that ever so slightly to 1.2200 as I thought I was a little too confident), the point is we are pretty much on track and baring a “horrific” Non-Farm Payrolls (NFP) number Friday or a surprise by the ECB on the Thursday, it looks like my prediction is getting warmer and warmer with each passing week.

The AUD started the week off with a beating, falling as much as 0.7% on average against its leading counterparts (AUDUSD down from 0.8815 to 0.8750). The drop followed a disappointing Chinese Manufacturing PMI reading released over the weekend (50.40). The report showed factory-sector activity growth unexpectedly slowed to the weakest in five months. The slowdown in China continues unabated. The BoJ stimulus package announced last Friday risks a currency war between China and Japan which could in turn engulf not only Asia but also the rest of the world. While it is all well and fine to “do whatever is necessary” to prop up one’s own economy, if by doing so you risk affecting your neighbours economy, these actions can a do end up causing rifts and counter-measures which over the long run can have lasting after-effects. That is why so many respected commentators were “shocked” by the extent of the BoJ’s QE package. It is as though they had complete disregard for those around them. Like our friend in Russia, it never pays off when you alienate your friends and trading partners. 

FED Pres. Yellen noted last week that “labour market conditions improved somewhat further, with solid job gains and a lower unemployment rate”. Furthermore she added “although inflation in the near term will likely be held down by lower energy prices … the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year.” Whilst this somewhat hawkish tone surprised some commentators, it said what it had to say. Third quarter GDP (+3.50%) last Friday simply reinforced what we already knew that the world’s largest economy is continuing to expand at a healthy level. As i mentioned above, this Friday’s NFP number could very well be the “icing on the cake” in that a strong employment number/low unemployment number will go a long way to strengthen Pres. Yellen’s comments and drive the USD even stronger to EURUSD target levels.

This morning sees the UK Manufacturing PMI numbers. I would not be surprised to see further evidence of a weaker PMI number, adding further pressure to GBP vs the USD (especially). Whilst EURGBP continues to drive towards the lows of 0.7760 (1.2885), it is really GBPUSD that is currently being torn apart. For this reason I am afraid to say, GBPUSD will follow the USD’s lead and over the short-medium term I would not rule out seeing GBPUSD trading in the VERY low 1.50 handle. It is really all about the USD right now, and neither the GBP, EUR, AUD, NZD, JPY, ILS, ZAR, RUB etc will be able to stand in its way!!

USDILS continues to get pummelled trading just shy of 3.80 as we speak (having already broken that level on Friday before profit taking ensued). Following the BoI’s interest rate decision last week and comments by the central bank, ILS market makers have decided enough is enough and have driven the ILS to its weakest levels since 2012. The Israeli market like all other EM markets are prone to sudden volatile movements and given the trend in the USD right now, the ILS will join the list of G7 and EM currencies getting a USD whipping. Israel’s export industry must be rubbing their hands in glee right now. With Israel’s recent gas finds off the coast and high-tech industry that is USD based, at least the CB can be assured of raising its reserves.

Have a great week ahead and good luck