Euro / Pound
Written by Toby Fischer
In late August Mr Watkins had found a property in Europe for which he had a balance of 150,000 Euros to pay. At this time the Euro reached 1.4900 to the pound, the property would have cost him £100,671.14
When Mr Watkins came to make the final payment in late September, the Euro had dropped back to 1.45, the result of which was a final price of £103.448.28 - an additional cost of a staggering £2,777.14 in four weeks.
Much of this loss could have been prevented by securing the rate with a forward contract. This mechanism is especially useful when market conditions are currently advantageous, but the currency is not actually required until a date in the future.
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Updated 16/12/04

Sterling lost more ground against the dollar on Friday, rattled after data in the previous session showed an unexpectedly large British trade deficit.
Britain's goods trade gap with the rest of the world widened in October to 5.3 billion pounds, its largest in 10 months, as imports hit a record monthly high.
Worries about the size of the U.S. trade gap and the U.S. economy's ability to attract investment flows to reduce it sent the dollar to record lows early this week.
"We had a bit of a surprise on the trade data and there's an increasing focus on deficits in the market. I don't think we'll pull back much further though," said Mitul Kotecha, head of global foreign exchange research at Calyon.
By 0835 GMT, sterling traded at $1.9080, down 0.8 percent from late New York levels. Against the euro, the pound stood at 1.4423, down slightly on the day.
Sterling has fallen sharply since hitting 12-year highs above $1.95 earlier this week, its best levels since Britain's currency crisis in 1992.
Recent upbeat British data had fuelled expectations of a further interest rate hike in 2005 but the pound became overstretched and fell with other currencies as investors took profits on their bets against the long-suffering dollar, traders said.
On Thursday, the Bank of England left interest rates unchanged at 4.75 percent at its monthly meeting, as widely expected.
Home Secretary, or interior minister, David Blunkett, resigned after UK trading hours on Wednesday and Blair quickly reshuffled his cabinet to fill the position with former Education Secretary Charles Clarke.
News that Prime Minister Tony Blair had lost a key member of his cabinet ahead of an election expected next year had little impact on the pound.
Chancellor of the Exchequer Gordon Brown testifies before a parliamentary treasury committee from 0915 GMT on his pre-budget report earlier in December.
Sterling rose against the dollar and euro after data on Thursday showed UK retail sales climbed more than expected in November, adding to a picture of economic health which has the market speculating about future rate rises.
November retail sales rose 0.6 percent on the month and 6.1 percent on the year. Forecasts had been for a rise of just 0.1 percent on the month and 5.8 percent on the year, against an actual fall in October of 0.5 percent on the month.
The pound was quoted at 1.4500 shortly after the data, compared with 1.4467 beforehand and erasing a slight loss on the day.
It was at $1.9438 versus $1.9410 prior to the release and 0.14 percent higher on the day.
Speculation over room for further interest rate hikes in 2005 is currently boosting the strength of the pound against the majors such as the Euro with potential in the future for a hike in the exchange rate in favour of the sterling.

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Inter-Bank
GBP/EUR – 1.4521
GBP/USD – 1.9448