In an ever-changing economic environment, Hamilton Court understands how FX can rapidly become one of the most significant risks to your business’ profitability. As companies navigate the implications changing macroeconomic landscapes we have helped a whole host of companies manage FX risk.
Currency Management and Limit Orders
Hamilton Court has over a decade's experience working alongside companies to provide them with the expertise, guidance, and support to manage their foreign exchange risk.
Our dedicated team of professionals help our customers navigate the volatility of the foreign exchange market through utilising a range of products from simple hedging strategies to regulated structured products. Hamilton Court also works alongside companies to work orders in the market to target higher rates of exchange and deliver meaningful value. We ensure that Hamilton Court’s services are aligned to the unique needs of each client as we understand the importance that FX plays in companies’ operations and profitability. Whether your company is exposed to foreign exchange though importing or exporting, investing or divesting, repatriating first-party funds or making third-party payments, our team’s emphasis on building longstanding relationships enables us to develop a deep understanding your company’s requirements to tailor make solutions.
Our client is a producer of agricultural products based in the south of England. Before Brexit, the free movement of goods and services into and out from the customs union allowed our client to sell their produce across the continent with relative ease and since the vast majority of their revenues were denominated in sterling, they had little exposure to FX risk. The decision for the UK leave the EU and withdraw from the single market meant that our client could no longer sell their products with the same ease. As such, they took the decision to establish a subsidiary based in Spain which enabled them to sell their produce across the EU’s 27 member states. This change in operations led them to accrue revenues in Euros, which exposed them to FX risk, given their need to repatriate these revenues into GBP.
Introduction with Hamilton Court
Prior to partnering with Hamilton Court, each time our client had accrued a float of Euros, they converted these funds in the spot market according to the rate of exchange provided. This left them open to risk, given that the volatility across the GBPEUR pair meant that spot rates could be subject to considerable intraday moves. Indeed, during the course of one trading session alone (namely 24/06/2016) GBPEUR saw an intraday move of 9.55% between highs of 1.3060 and lows of 1.2015, thus underpinning the risks involves with passively trading in the spot market.
While before Brexit, our client had had little exposure to the FX market, the subsequent rise in Euro flows as a result of their subsidiaries meant that the effective management of their portfolio was becoming increasingly pressing to the business as well as its profitability. Subsequent meetings with one of our Euro specialists revealed how we helped similar businesses to manage FX risk in a post-Brexit world thus highlighting the value of partnering with Hamilton Court.
Providing Solutions: Our Client’s Partnership with Hamilton Court
The Value of Orders
After onboarding, a strategy meeting highlighted how our client often had a window of opportunity spanning several weeks in between accruing FX funds on the one hand and needing to convert them on the other. Through analysing their cashflow requirements and business time frames Hamilton Court was able to introduce the value of limit orders.
Working limit orders are a useful way of targeting higher rates of exchange. Though analysing trends and upcoming data points, we provide the advice, guidance and support for clients to place instructions that trigger contracts if levels are reached. This enables client’s to take advantage from upside moves which may be temporary or occur outside of standard working hours. Hence, whether at the start of the ASX opening bell or end of the NYSE closing bell, we would work their order 24/7.
Their dedicated account manager then discussed factors which could engender volatility, downside risk and upside opportunity to the currency pair. For example, technical analysis into GBPEUR, indicated convergence around a key level of support for sterling, which if broken suggested significant upside potential for EUR. While risks were assessed, given the release of tier one fundamental data including UK CPI and Eurozone HICP at the end of the month – along with the ECB and BoE’s respective interest rate decisions at the beginning of the next month – there was a significant opportunity for EUR strength here.
As such, our client placed a limit order to sell €1,000,000 at a level 1.5 cent below the current spot rate. Subsequent data including softer-than-expected UK CPI and dovish tones from the BoE put further pressure on sterling, while easing energy insecurity fears on the continent and hawkish undertones from Frankfurt further fed into Euro strength. Accordingly, the Euro was trading close to five-month highs against sterling, and a subsequent Euro rally at the start of the trading session in Asia saw the limit order triggered before the sun had risen over the London skyline.
The use of the limit order meant that in just a short period of time our client benefited from a rate which was 1.3% stronger relative to when they placed the instruction, equivalent to an additional £11,593 on their bottom line.
Conclusion
In an ever-changing economic environment, Hamilton Court understands how FX can rapidly become one of the most significant risks to your business’ profitability. As companies navigate the implications of changing macroeconomic landscapes we have helped a whole host of companies manage FX risk. We take time to understand each individual business as we believe this is of the utmost importance in building long standing relationships which produce meaningful value. Hence, understanding our client’s time frames and cashflow needs enabled us to effectively utilise products such as limit orders which have demonstrably added value. As our client’s overseas operations continue to grow, Hamilton Court is proud to work in partnership with them and provide exemplary round-the-clock service.
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