In its first Holiday Money Index of 2020 measuring exchange rate movements and foreign currency sales, Post Office Travel Money reports that demand for holiday money in July showed a positive recovery trend after the prolonged slump during lockdown. At the same time, sterling has held its value and is now worth more against all major holiday currencies than in August 2019.
In particular, the UK’s largest provider of foreign currency, accounting for one-in-four UK transactions, says that its sales of the euro are bouncing back after lockdown eased. As evidence of this, the Post Office said that euro purchases on its Travel Money Card in July surged to 10 times the level prior to the start of the lockdown period.
The euro heads Post Office Travel Money’s 20 top selling currencies for July covering countries on the government’s list of ‘safe’ destinations for UK travellers (see accompanying Fact Sheet table 1). There are two new entrants to that list: the Icelandic krona (20th) and Vietnamese dong, which has leapt into the top 10 for the first time in ninth place. Vietnam looks to have benefited from being the only Far Eastern beach destination named on the government list.
Comparing the position now with earlier in 2020, the Vietnamese dong (+31 per cent Jan/Feb 2020) was also one of 20 Post Office currencies showing significant year-on-year sales growth in January and February 2020 before the Covid-19 pandemic took hold (see Fact Sheet table 3). In those months, the Post Office’s 20 fastest growing currencies saw percentage rises of between 24 and 58 per cent. Among those to show the biggest growth were the Turkish lira (54 per cent), currently fourth in the July top 20, and Scandinavian currencies, up by around 30 per cent.
All of these currencies also feature in the July bestsellers list and so their positive early season performance can, suggests Post Office Travel Money, be seen as a good indicator of which destinations are on Britons’ 2020 hotlist and of a strong underlying appetite for overseas travel. This may bode well for travel later in the autumn once the current uncertainty over entry restrictions to individual countries and quarantine rules become clearer.
Exchange rates are likely to be a deciding factor. In its Exchange Rate Monitor analysis of rate movements (Fact Sheet table 2), the Post Office found that sterling is stronger year-on-year against all 20 of the bestselling currencies whose countries are on the Government approved list. The biggest gain of over 21 per cent will be for visitors to Turkey with £88 more to spend on a £500 transaction. Those visiting eurozone countries will have around £10 more cash in hand.
For those holidaymakers who want to travel outside Europe, most of the Caribbean islands are on the Government list. Their currencies are pegged to the US dollar and, with the recent plunge in the dollar’s value against sterling, visitors can expect significantly more cash for their pounds.
In Jamaica, for example, sterling is currently worth 16.6 per cent more than last August, which means a gain of £71 in Jamaican dollars on a £500 currency transaction. Holidaymakers visiting either Antigua or St Lucia will receive £33 (7.2 per cent) extra on a £500 exchange, while those travelling to Tobago can expect to gain almost £28 (5.8 per cent) more.
Post Office exchange rate analysis also reveals that sterling has recovered well from its 2020 low point going into lockdown in March (Fact Sheet table 4). 80 per cent of the top 20 currencies are stronger than in March, led by the Jamaican dollar, which has gained almost 21 per cent in value since then. In fact, all Caribbean currencies have seen double digit percentage growth. The only currencies to fall in value since March were the Norwegian krone (-14.1 per cent), Australian dollar (-11.6 per cent), New Zealand dollar (-5.8 per cent) and Czech koruna (-1.3 per cent).
Less positively, sterling has fallen in value against 16 of the 20 bestselling currencies when compared with its 2020 high on 14 February. The biggest falls have been against the Danish kroner (-8.9 per cent) and euro (-8.5 per cent).
Nick Boden, Post Office Head of Travel Money said: “It is great news that Britons travelling abroad this summer will find the pound in their pocket stretches further than a year ago in all the major holiday destinations currently cleared for travel. Admittedly sterling has slipped from its high in February, but it has also recovered well from its lockdown low as our analysis of currency values now compared with earlier in 2020 shows. We do recommend people planning to travel abroad follow FCO advice carefully.”
Changing purchase patterns
After re-activating its online and branch pre-order FX service at the end of June, Post Office Travel Money is now offering around 60 currencies, significantly more than its competitors. In that time, it has seen several shifts in currency purchasing patterns. The volume of currency purchased online for home delivery has more than doubled, while online sales themselves have been faster to recover from lockdown and have gained three per cent in their share of overall Post Office sales.
Britons are also taking more money abroad. Post Office analysis shows that average currency transactions have risen 22 per cent year-on-year to £423 and are 42 per cent higher than before lockdown when they stood at £297.
Recent months have also seen a steady rise in the percentage of contactless transactions made on the Post Office Travel Money Card. These have risen from an average of 50 per cent prior to lockdown to around 64 per cent now. Over half (55 per cent) of Travel Money Card transactions are now euro ones – up from 35 per cent pre-lockdown. However, only 3 per cent are US dollar transactions compared with 14 per cent before lockdown.
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