Buying Pounds now?

As to predicting exchange rates, professionals get it wrong, but if you think you are smarter than them and think the pound will strengthen between now and your trip, buy away. What are your transactions fees to purchase currency? The primary reason for the significantly changed rates is Brexit. The politics of it are truly amazing with resignations aplenty as few seem to want their fingerprints on the next steps. Is this the story line for a new series like House of Cards?

What you are doing is playing the currency futures market. You are not a broker. So keep in mind that to go somewhere local to obtain your GBP will cost you on the order of 5% for the transaction. On today's rate, you will only be ahead if by next May a pound costs over $1.39. And the current predictions are for it to be dropping. Meanwhile, your $1,000 is not available for you to use, or otherwise earn money on.

Or to put it another way - do you invest the rest of your money in futures?

"I am planning a trip in May and who knows what will happen by then"

Exactly. So, if you like to gamble, you can buy some pounds now. If you don't want to gamble, wait until May. Only then will you know if buying pounds now was the right or wrong decision.

If you do want to do this, remember that you are comparing apples and oranges when it comes to costs. Buying now in the US, you have to figure in the extra costs compared with using an ATM in the UK. So, you are betting that the current exchange rate available at your bank, including all their fees, will be better than the rate at an ATM next May, including whatever fees you pay for this.

If you look at the other way round, buying now crystallises your cost in dollars and waiting to next May is the gamble.

The problem as related earlier, are the lousy rates and high commission fees you get in general on forex in the USA.

It is a dice roll. I would not do it for most of the previous stated reasons.

GBP (Pound) is still falling in value. It lost another penny against the dollar today.

Playing the currency futures, which is what you are proposing, is not an easy thing to do. No one can predict what the Pound will be worth tomorrow much less next summer. Unless I were to see a major uptick in the Pound (which takes a day or two for my bank to adjust to on any currency they offer), I would just wait till I get there to get some from an ATM using a no fee debit card considering the high fees most of us would pay to buy through a local source. A better deal would be to simply buy from friends or family who are recently returned from the UK and looking to dump some leftover Pounds. Pay them the current Google rate which is more than they would get at any exchange here in the US and also less than you would pay at the same exchange as well. A win-win.

David,

Which major US banks sell foreign currency at close to ATM rates? Please tell me, I have looked everywhere for one.

Chase and Wells in my part of the US both charge around 8% over the interbank rate on a good day to get Euros or Pounds as well as a delivery charge to have the currency delivered to the bank branch where I have to go to pick it up. Chase also charges me 5% + $5 for every ATM withdrawal outside the US. I don't consider either of those options to be good for me.

With my Capital One 360 debit card I get cash out of foreign ATMs at the Google rate = no markup on the rate (the worst I have seen was during a particularly volatile day for the Euro where I paid an extra 10 cents on a €250 withdrawal over what Google showed it should have cost me, all others don't even show a difference in over 10 years of travel), no percent fee, no additional fees of any kind. I fail to see how I might be deluding myself about what it costs when the info is printed on my bank statement and I can easily compare to what Chase would have charged me.

The best rates from US banks for buying foreign currency, are Wells Fargo and Bank of America. However, you now need to have an account with one of them. The rates are far better than my local bank, but not as good as from an ATM in Europe.

When I set up a Capital One account in May 2015, the rep in the Washington DC storefront office told me I could get euros from them at a very good rate. I don't remember the exact details of what he said, because I didn't need euros at that time. The rate may be the same one they use for ATM withdrawals performed overseas. I think that low rate is just for holders of Cap One bank accounts. One of these days I'm going to follow up on this information and actually make a purchase. I'll report on the results here after I do that.

I believe Wells Fargo's charges are lower for its banking customers, too. Having a Wells Fargo mutual fund account doesn't help; I asked.

It's possible that David is getting good exchange rates from his own bank with which he has an account. A few banks probably do that but it is the exception and not the rule. Expect to pay in the range of 5-10% for exchanging currency at a bank or AAA. Over 10% if using a currency exchange agency.

As to the OP's proposition, the currency fluctuations are tied to the market instability caused by the Brexit vote. That instability is likely to continue for 2 years or more given new elections this fall, negotiations over the withdrawl, and then the actual implementation and economic impact that it causes. If you think you can figure out what will happen and how the currency markets will respond, go for it.