Hedgebook’s FX broker and bank partners often want to share their view of the world with customers. That view takes the form of expectations around the future direction of foreign exchange rates.
There are many factors that feed into economists’ models, but the output of those models is a forward -looking prediction of exchange rates. The prevailing market reflects rates that can be transacted today, both spot and forward rates.
The forward rates are mathematically calculated based on the current spot rate and interest rate differentials between two currencies. Broker and bank FX forecasts are a prediction of the future travel of exchange rates based on their own data.
When deciding whether to hedge or not, or how much to hedge, it is important to consider not just the rates that can be transacted today, but where they might be next week, next month or three months from now.
There is no crystal ball for FX forecasts
If rates are anticipated to move in the customer ’s favour, then holding off entering new hedging, or transacting a minimal amount of hedging may be the appropriate course of action.
Conversely, if rates are deemed to be at favourable rates today versus what the expectations are for rates in the future, then now may be the right time to enter new hedging.
Banks and brokers do not have a crystal ball when it comes to predicting the future, but they do have highly qualified resources to analyse and interpret the many influences on exchange rates enabling them to make an informed opinion – particularly when this is combined with Hedgebook.
By sharing these well considered FX forecasts, customers in conjunction with their bank and broker partners can include them in the strategic decision-making process.
Hedgebook is the conduit for the melding of foreign currency exposure, existing hedging, market rates, budget rates and now FX rate forecasts. All of these data points are key to a well-informed hedging program. If you would like a closer look at how this could work for your bank or broker firm – then please reach out and we would be delighted to show you.
