Stef’s market update – July 2026 – why currency risk deserves more attention

Most businesses keep a close eye on interest rates, tax and borrowing costs, but foreign exchange can have just as much impact on cash flow and profit.

Any business that buys or sells goods and services overseas is exposed to currency movements. That includes manufacturers, importers, exporters, retailers, tech firms and professional services businesses with clients or suppliers abroad.

The issue is that exchange rates move all the time. A business may agree a price with a customer or supplier based on one rate, only for the market to move before payment is made. That can leave the business receiving less than expected or paying far more than planned.

Even a small movement can make a big difference.

Take a UK importer buying $10 million of stock each year. If the business sets its prices based on an exchange rate of 1.34 and the market falls to 1.30, the cost of those goods rises. The business then has to absorb the loss through its margin or increase prices for its customers.

Exporters face the same issue in reverse. A UK business expecting to receive €1 million in three months may end up with fewer pounds if the euro weakens before payment arrives.

This is why more businesses are starting to take currency planning seriously.

Good currency management can help protect budgeted rates, make cash flow easier to forecast and give the business more certainty over future costs. It also helps with day-to-day trade, whether that means paying overseas suppliers, receiving funds from customers or holding money in more than one currency.

There are several ways firms can manage this.

Forward contracts can lock in an exchange rate for a payment due at a later date. Currency options can offer protection if the market moves against the business while still allowing some benefit if rates improve. Multi-currency accounts can also help firms hold funds in different currencies and reduce the number of transfers they need to make.

Some businesses may also be able to match income and costs in the same currency, reducing the amount they need to exchange.

The right choice depends on how the business trades, the sums involved and how much certainty it needs. A firm with one overseas supplier may need a very different plan from a business buying stock in dollars each month or selling into several global markets.

This is becoming more relevant as businesses review every part of their cost base. Currency risk can be easy to overlook, but it can have a real effect on pricing, profit and working capital.

If your business trades overseas, it is worth checking whether your current arrangements still give you enough control and certainty. A small amount of planning now can help avoid an unwelcome hit later.

At Evolve Business Finance, we work closely with our trusted foreign exchange partner, Smart Currency Business, to help clients manage currency risk alongside their wider funding arrangements.

If you’d like to discuss your foreign exchange requirements or open an account, please contact Tobias Woodward at Tobias.Woodward@smartcurrencybusiness.com