The value of most of the major currencies in the world is determined by supply and demand in the foreign exchange market—a currency's value increases when there is a great demand for it, and vice versa.
A country's foreign exchange rate provides a window into its economic stability, and it is closely watched and analyzed.
What Is GBP?
GBP, or British Pound Sterling, is the official currency of the United Kingdom and its territories. It is denoted by £.
The most popular currency pairing involving the British pound is the GBP/USD and EUR/GBP.
Why is GBP Falling?
The pound hit a record low versus the US dollar on September 26, 2022.
Investors rushed to dump government assets and currencies as the British pound fell to its lowest value ever versus the US dollar. Let’s look at why GBP is falling.
UK's Tax Plans
Typically, the UK Chancellor outlines the budget for the 12 months once a year. The announcement typically includes new government programs, projected tax system reforms, and adjustments to the welfare and social care systems.
Liz Truss became prime minister midway through the fiscal year, and her chancellor Kwasi Kwarteng announced what had been dubbed a "mini budget" in the run-up to the announcement.
The tax system underwent some of the most significant changes in recent history:
The value of the pound plummeted following British Chancellor of the Exchequer Kwasi Kwarteng's announcement that the country would impose the largest tax cuts in 50 years, including removing the 45% tax rate on incomes over 150,000 pounds ($162,000).
The drop of almost 5% to slightly over $1.03 occurred during trading in Asia and Australia. It extended a 3.6% drop from 23 September, leading to predictions the pound might fall to parity with the US currency. It managed to rebound marginally and returned to $1.07 after European traders started trading online.
The proposed tax cuts aim to strengthen the struggling UK economy and lessen the likelihood of a severe recession. However, it has led to worries about higher price increases, unmanageable government debt, and a worsening recession.
Waning Investors' Confidence In The British Economy
Investors are worried about the UK's capacity to manage such a large increase in debt, as evidenced by the dropping value of the pound, particularly because rising interest rates have made borrowing far more expensive.
The UK's economy, which has the highest inflation rate among the G7 countries, and the government's huge fiscal bet on growth are hurting the pound more than most currencies. Compared with a decline of 15% in the euro, the British pound has lost close to 21% of its value so far this year.
The previous record low for the British pound against the US dollar was on February 25, 1985, when it hit an all-time, falling to a value of little over $1.05.
Political decisions made in the UK have long hurt the British pound. Recent instability includes political infighting, forming a new government, a second Scottish independence vote, a potential trade war with the EU over the Northern Ireland protocol, and Brexit. Political instability negatively impacts the GBP.
In addition, if the conflict in Ukraine escalates, both the Pound and Euro will experience a significant fall.
The government will need to borrow an additional 72 billion pounds ($77.7 billion) over the upcoming six months to finance the tax cuts and a scheme to help consumers deal with their growing energy bills.
What Makes The US Dollar So Powerful?
The US dollar has been on an upward track since mid-2021 and achieved a 20-year high in August versus six major currencies. The value of the pound fell to an all-time low against the US dollar. Two key factors contribute to the strength of the USD:
Confidence in the US Economy Relative to its Counterparts
Similar to how falling investor confidence in a country's economy is reflected in a currency's depreciation, rising investor confidence in a currency indicates that the prospects of an economy are strong.
Because the US has such a strong and massive economy, the US dollar has always been regarded as a safe haven for investors. So if there is global uncertainty, holding US dollars is considered a safe bet because they maintain their value well.
Even while the US economy is struggling with high inflation and slowing growth, it is still seen as being in a better position than other economies like the UK and the Eurozone, which are both widely considered to be in a recession.
Understandably, investors are turning to the US dollar in light of the conflict in Ukraine, the political and economic issues in Europe, the high rate of inflation, etc.
Rise in the Dollar’s Interest Rate by the US Federal Reserve
The dollar price has increased due to investors being tempted to exchange other currencies for dollars since depositors at US banks now receive higher interest rates.
Interest rates have been rising at the same time in other countries' central banks, notably the UK, and the eurozone plans to follow suit, but not as aggressively as the US. And with Japan not tightening its monetary policy, the net result is greater demand for greenbacks overseas.
The dollar's strength also makes it more challenging for many developing countries to pay back their debts, which are frequently held in US dollars.
These countries will either need to increase taxes on their people, print local currency that will inflate, or just increase borrowing. Depending on the course taken, there may be a severe recession, hyperinflation, a sovereign debt crisis, or all three at once.
What Can the UK do to Stop the Fall of the Pound?
To attract foreign investors with higher yields, raising interest rates is the primary tool available to support the pound or any other declining currency.
The UK's central bank decided against an unforeseen rate hike, despite calls for quick action from experts. Bank of England and Bank of Japan both have the option of raising rates to keep pace with the rising US interest rates.
This may help, but it won't have much of an impact on currency prices if investors don't witness bold enough steps from the BoE or BoJ. For example, a higher increase in the rates than what is expected.
However, the problem with an extremely large increase in interest rates is that they are probably going to cause the economy to enter a recession, which nobody wants to happen.
Governments can also take direct action by buying up their currency to support its value, but many countries frown upon this, and it runs the danger of resulting in trade penalties.
Furthermore, the pound and yen are officially floating exchange rates; governments do not frequently meddle in the foreign exchange market.
In an aggressive bid to combat the US economy's ongoing problems with high inflation, the Federal Reserve recently approved a third consecutive 75-basis-point increase.
The future for the global economy appears particularly bleak when these factors are combined with a severe fall in US dollar liquidity and a sharp increase in US interest rates.
What to Expect in the UK as an Indian Tourist
Tourists who are already in the UK and want to use their native currency for transportation, shopping, and dining will benefit from the pound's decline.
The cost of hotel and travel packages will decrease in GBP, but not for packages priced in rupees. According to the most current exchange rate between the rupee and the pound, hotel rates will reduce by 5-8%.
The pressure on GBP will increase due to the problems mentioned above and various other factors, and it will continue to decline against the USD and consequently against the INR. As of October 4, 2022, the GBP to INR exchange rate has been fluctuating around 1GBP/92INR.
Additionally, keep in mind that you will pay a forex markup of 2–3% for payments made in GBP.
However, given the value of the pound has been continuously falling since the start of the year, the savings will be insignificant.
For anyone booking flight tickets to the UK, note that for airline tickets priced in Indian rupees, currency fluctuations do not affect their prices as airlines generally sell tickets in the currency of the country of origin.
For many immigrants or individuals supporting their families in the Philippines, understanding the fluctuations in USD to PHP exchange rates is very tricky. Navigating the intricacies of these rates involves examining a spectrum of economic, political, and social factors.CompareRemit is here to make life easier for you, so you can make the best decision with little to no hassle on your part. In this guide, we'll unravel the complexities surrounding USD to PHP exchange rates, providing valuable insights to empower you in making informed decisions for your money transfers.Interest Rates: The Currency Tug-of-WarOne of the primary factors that influence exchange rates is interest rates. When the U.S. Federal Reserve adjusts interest rates, it sends ripples through the currency market. Generally, higher interest rates attract foreign investment, strengthening the USD against the PHP. For individuals, keeping an eye on interest rate differentials between the U.S. and the Philippines can offer insights into potential shifts in exchange rates.Inflation: The Balancing ActInflation, the rise in the price of goods and services, plays a pivotal role in currency valuation. Countries experiencing lower inflation rates often witness an appreciation in their currency. Comparing inflation rates between the U.S. and the Philippines allows you to gauge the potential strength of the USD. A lower inflation rate in the U.S. compared to the Philippines may contribute to a stronger USD.Government Policies: Shaping Economic StabilityGovernment decisions and economic policies, both domestic and international, have large impacts on exchange rates. Policies promoting economic stability, prudent fiscal management, and sound monetary measures contribute to a stronger currency. Staying informed about the policies of both the U.S. and the Philippines will allow you to gain an understanding of the economic health and help predict dips and rises in exchange rates. Trade Balances: A Global PerspectiveThe dynamics of global trade, including exports and imports, definitely impact currency values. A country with a trade surplus, exporting more than it imports, may see a stronger currency. It might be very tedious to stay up to date with trade imbalances between the U.S. and the Philippines, but doing so can serve as an indicator of potential exchange rate movements.Historical Data: Patterns and PredictionsAnalyzing historical USD to PHP exchange rate trends can reveal patterns and provide insights. While past performance doesn't guarantee future results, understanding how rates responded to similar economic, political, or social events can guide your decisions. Historical data offers a valuable tool for predicting potential movements in exchange rates.Practical Tips for Informed Money TransfersStay Informed: Regularly follow financial news and updates from both the U.S. and the Philippines to understand the broader economic context. Regularly read our blogs to stay up to date with all the major money transfer news. Utilize Reliable Tools: Use CompareRemit’s online comparison tool and email alerts to track real-time exchange rates, ensuring you get the best value for your money transfers.Seek Professional Advice: Consulting financial experts or using professional services can provide personalized insights tailored to your specific situation, enhancing your decision-making process.In conclusion, comprehending the factors influencing USD to PHP exchange rates empowers you to make informed decisions when sending money to the Philippines. By staying attuned to economic indicators, leveraging historical data, and adopting a proactive approach, you optimize your money transfers, securing a more stable financial future for your loved ones.
When it comes to repatriating large sums of money from India, it puts every NRI in a situation where he has to consider different obligations regarding monetary cross-transfer. Taxation, reliability and transfer timelines are a few things that influence these decisions.Personal finances have to be dealt with delicately and ensured that there is no loss during the due process of remittances. There are various options available in the marketplace today, be it via traditional banking or the modern ways of online transfers.CompareRemit offers a platform that allows you to compare different players in the market and pick the best rates that suit your needs.Repatriation from an NRE AccountAs a component of the liberalization scheme of the Reserve Bank of India, remitting funds from India has become relatively easier. Balances in NRE (Non-Resident External) accounts are freely repatriable. No formalities or requisite permissions are required for remittances abroad be it any amount. Funds in accounts are usually funds deposited from abroad or current income like interest or dividends on investments made through foreign funds.Repatriation from an NRO accountBalances in NRO (Non-Resident Ordinary) accounts are subject to certain conditions. The remittance of USD 1 million per financial year from NRO accounts is allowed subject to certain procedural formalities. NRO account balances include income earned locally or certain capital account transactions. Form 15-CA and 15-CB need to be submitted before a remittance can go through.Read more on difference between NRE and NRO account on CompareRemit.The Traditional Option - BanksThe most sought after choice for remittances to the UK are banks. Banks are the most popular means of transferring money to the UK because:There is a high level of trust owing to the various government regulations.Familiarity and the comfort of knowing the neighborhood-friendly banker.There are two ways one could remit funds using banking services:Online - If your bank has given you access to internet banking and allows repatriation through online instructions.In-Person - One could walk into the bank yourself and have the formalities completed there and then and have the satisfaction of seeing it to its destination with a receipt in your hand.However, it is important to note that INR to GBP/GBP to INR exchange rates may not always be competitive. The transfer fees can be high and the charges, not always transparent.Selection of Remittance Service ProviderShould you want to avoid remitting through banks, approaching a marketplace of money changers would be the next best option. A selection of remittance service providers should be made based on the following:- Transfer chargesSpeed of transferExchange ratesCharges on the conversion of currency (INR to GBP)Freeze option on exchange rate while process requirements are completedFlexibility of payment optionsAlternative Options for Remittance from India to UKWise - UK based transfer service supporters - Wise incorporates credit cards/debit cards, SWIFT, international transfers to bank accounts, domestic wire transfers and more. Wise offers competitive exchange rates for pound to rupee or rupee to pound conversions. It assures fast and low-cost online money transfers from India to the UK.ExTravelMoney - One of the easiest services for transferring funds from India to the UK, they also offer the facility of booking orders online.Western Union - In four easy steps available online and your money is sent from India to the UK. They offer competitive rates and faster transfers as well.Thomas Cook - Provides the best foreign exchange rates besides giving the assurance of secure and timely remittances for specific purposes.BookMyForex - With zero commission and zero charges, they claim to send money from India to the UK at guaranteed lowest exchange rates. The time span for the transfers to be effective is 12 to 48 hours.To select the right money transfer service one should keep the cost and time factors in mind. Convenience at a reasonable cost should be the mantra for selecting a suitable remittance service provider.
How do you pay your employees? As an employer, paying your employees is an important part of your business. Direct deposit to your employee's bank account or issuing paper checks are two of the most common ways of compensating them. Gone are the days when employees used to get paid in cash.But what happens when some employees have no bank accounts? This is where paycards come in. Paycards for employees are an alternative option when the employees do not own a bank account, and the employers do not want to pay in hard cash.It is estimated that about 5.4% of U.S. households (approximately 7.1 million) were "unbanked" in 2019, according to the U.S. Federal Deposit Insurance Corporation (FDCI). An unbanked household means no one in the household had a checking or savings account at a bank or a credit union.For small businesses with employees with no bank accounts, paycards can be a convenient option as a payment option.Direct deposit and paycards both offer the benefit of a paperless payroll distribution process and allow the employer to electronically transfer funds conveniently. While direct deposit is the norm for many businesses, paycards are gaining popularity each year.There are pros and cons of using paycards, and in this blog, we will discuss if paycards are right for your business and employees.What is a Paycard?Paycard is a lot like a prepaid debit card as it is made of plastic and can be pre-loaded. In the case of a paycard, the money loaded comes from the employer in the form of an employee's pay. The card carries the issuer name such as MasterCard, Visa, or Discover.Are Paycards Good, and Who is it For?A pay card can be used to pay an employee who does not have a bank account. Paycard holders or employees can cash out from paycards at a bank, ATM, or other point-of-service locations.Employees can also pay bills over the phone using their paycard number or authorize electronic bill payments to specified companies.Employees can use paycards at any merchant, grocery store, retail shop, or gas station that accepts debit cards.Do Paycards Have Fees?By law, employees must be able to access their wages in full without any fees. They can obtain the cash at a bank teller, ATMs associated with the card issuer, pay bills by telephone, or use the card for point-of-sale purchases.However, there may be fees for electronic fund transfers or for cash withdrawals at ATMs that are not in the issuer's network. There may be fees for card replacements, balance inquiries, inactivity fees, or other reasons. The Consumer Financial Protection Bureau issued a rule in April 2019 that paycard issuers must disclose all the fees to cardholders.Employees must be informed of the potential fees. The paycard issuer is required to give you disclosures on such fees before you sign up for a paycard or a payroll card.Also, paycards are regulated by state laws, so you might have to check for additional details depending on your state. Some states are making efforts to reduce fees that affect employees.As you can see, paycards fees mostly affect employees. In the case of direct deposits, employers are the ones who have to pay fees for setting up the payroll distribution system and a transaction fee for each time they transfer wages into an employee's account. The payroll software may also charge a fee for their service.Can Employers Save Money When Using Paycards?Since paycards are reloadable cards, employers can have the banks reload the paycards with their employees' wages for the pay period, avoiding the costs and hassle of issuing paper checks, mailing them, or re-issuing lost checks. The savings may not be a substantial amount but they can add up gradually.Can Employers Choose between Direct Deposit and Paycards?While there is no mandate that employers can only offer either direct deposit or paycards to their employees for their wages, it is safe to check with your state's law on payroll distribution.One-third of states allow employers to require employees to have bank accounts for direct deposit. In such a case, paycards may not be needed. Also, there is no law preventing employees with bank accounts to opt for paycards as their payment option.Though generally, employees tend to prefer direct deposit because of its efficiency and the least costly method of payment, as a business owner or an employer, it is better to give options instead of imposing only one method.Ask your employees about their preferred method of payment and what benefits (convenience, low fees, etc.) serve them the best.In fact, Federal law requires employers to offer alternative payment methods like paper checks or direct deposits.Should Employer Provide Pay Stub?Pay stub provides details of the employees' pay for each pay period. Employers are not required by federal law to give employees their pay stubs. However, many states have laws that require some form of written pay statement.Even if your state doesn't need you to provide pay stubs, you are still required by the Fair Labour Standards Act to keep track of your employees' working hours.For employees, a pay stub gives a record of their wages, deductions, contributions, and other information. It is also proof of income or employment, which is often needed when applying for a loan, credit card, or housing.For employers, a pay stub is useful for tax purposes, and it can be used to resolve any discrepancies with employee pay.Is it Possible for Paycards to be Overdrafted?Usually, paycards works like debit card, allowing cardholders to withdraw up to the limit of the loaded amount. However, there are paycard that allows overdraft for employees. But it can come with hefty overdraft fees if employees use funds over the limit in their account. Usually, you should be able to prevent misuse by subscribing to an overdraft protection service.Will Paycard Affect Credit Score?Paycards, like all prepaid cards, do not affect an employee's credit score.What is a Paycard Gets Lost or Stolen?A replacement card can be issued in such cases. The employee needs to notify the employer, and then the employer should immediately notify the card issuer. The employee is not liable for the incident as long as the issue is timely reported. Paycards come with similar protection as that of a prepaid card.The reporting time is determined by the card issuer. If you wait longer to report after learning of the loss and theft, the fraudulent charges may increase. You may have to pay a fee for the replacement card.Pros and Cons of PaycardsProsA win-win situation for unbanked employees and their employers.Green alternative to paper checks.Immediate payment to employees.No hassle of cashing a paycheck.No monthly or maintenance fees.Added security when assessing their funds (paycards require a PIN).Employees can report to the issuer if funds are used unauthorized.Paycards can be reloaded during each payday, saving money on issuing paper checks.Added efficiency for the employer as the employer would not have to physically present or mail paychecks to unbanked employees.ConsEmployees may incur fees for several reasons. Be aware of such potential fees.Employers have certain responsibilities to educate employees about the usage of paycards.Limited range of services and flexibility in managing your funds compared to bank accounts and other prepaid cards.The best paycards programs are easy to set up, have lower fees, quick access to funds, and provide a range of benefits such as cashback and discounts. We have made a list of popular paycards providers for businesses:Wisely Paycard by ADPOnline portal and mobile appCompatible with Apple Pay, Samsung Pay, and Google PayZero cost sign upNo hidden feesNo credit checkNo overdraft feeZero cost direct deposit of pay and other sources of income (including government benefits)Accepted wherever Visa is acceptedKeep track of spending and account balances 24/7 on the appGet cash back at major retailersSurcharge-free ATM withdrawalsFDIC insuredSecurity features include instant card lock, purchase protection, and travel alert notificationsRapid PaycardDirect Deposit onto rapid paycardLoad funds from approved checks with Ingo Money mobile appsNo fee for cashing paycheck24/7 account access with rapid! Access mobile appNo credit checkCan be used at ATMs, merchants worldwide, wherever Debit Mastercard or Visa debit cards are acceptedPay bills and make purchasesBook airline and hotel reservations onlineEarn interest on savings accountGet cash back rewardsFDIC insuredMoney protected with Zero Fraud LiabilityKittrell PaycardNo fees to use (there are fees for certain situations)Fee-free ATM network with MoneyPassWebsite and Kittreall AppGet real-time alerts and push notificationsCash back at point-of-sale terminals2-way texting to manage your card and accountCompatible with Apple Wallet, Google Pay, Samsung PayEasy portability (Get direct deposit of stimulus checks, tax refund, benefits)Freeze or unfreeze card on-demandSkylight PaycardZero sign up feeNo credit checkNo minimum balance Personalized your card with a family photo or unique imageManage money anywhere on Mobile AppDirect deposit your government benefits, tax refundsUse anywhere where Visa Debit & Debit Mastercard are acceptedFDIC insuredZero liability protectionPay bills onlineEarn interest on savings accountEarn cash back with Payback RewardsSend money to or receive money from friends and family with Netspend cardsSet text alerts about transactionsRefer a friend and boost your card balanceSkylight overdraft limit is $100 & 3 times/ monthConclusionOverall, paycards can be convenient and cost-effective for employees and employees when compared to paychecks or for those employees with no bank account. And the paycard fees are becoming more transparent and competitive.While paycards can be challenging at times, especially when you are employed in multiple jobs and have a separate paycard with each employer, your funds are scattered in multiple cards so it becomes difficult to manage your finances. Some may prefer to put all their money in one place, like a checking account.However, if you can't open a bank account, a paycard is a great option to get paid. Read the fine prints before signing up for a paycard and know the potential fees that come with it.