Should we purchase euros for a trip to Italy in April?

Q We are heading to the south of mainland Italy and Sicily in late April. Should we purchase euros in advance of the UK leaving the European Union on 29 March?

Martin C

A In the short term (and certainly covering your impending holiday) any significant movement of the pound will depend largely on the manner of Britain’s departure from the EU. More than 30 months have elapsed since the vote to leave the European Union, and with only 30 days left until the date chosen by the prime minister for the UK to exit the EU, there is still no certainty about what will happen. This is having a serious impact on the travel planning by millions of people such as you.

But I can tell you what I think the effect of each of several possible outcomes will be on the strength of sterling relative to euros. You can then either make your own judgement about which result is most likely, or watch events and wait for the £:€ rate to shift to your advantage – whereupon you can pounce. (I am practising the latter strategy.)

The markets believe that the softer the form that Brexit takes, the less will be the damage to the UK economy and the more appealing sterling looks to investors. Therefore if Theresa May were to relax her red lines to allow continued membership of the single market (and consequent free movement of labour), you could expect the pound to rise against the euro.

It could be that the prime minister wrings some concessions on the Northern Ireland backstop out of the European Union and that the right wing of the Conservative Party then supports her deal, or her strategy of “running down the clock” pays off and she gets reluctant support from MPs. The markets seem to have “priced in” this outcome, in which case you can expect little effect on the value of sterling if and when it happens. The same applies if the can is kicked down the road with the postponement of departure day – though if that is accompanied by the prospect of a second referendum, then the pound may appreciate.

The closer we get to 29 March without agreement on the terms of the UK’s exit, the more likely a no-deal Brexit becomes – at which point the value of the euro will fall sharply against the US dollar, but sterling will slump even deeper.

So predict away – or if you prefer to hedge your bets, then buy some currency now and the rest shortly before you leave. Just make sure that you exercise the one element you can control: maximising the value of each pound by shopping around for the best rate.

Then escape all the madness in the beautiful south of Italy.

Every day our travel correspondent Simon Calder tackles a reader’s question. Just email yours to s@hols.tv or tweet @simoncalder