Forward Contracts — Fix a Rate for a Future Payment
Lock today's exchange rate for a payment that settles later — up to 12 months as standard, longer by arrangement. Used for property completions, supplier invoices on terms, staged build costs and any dated foreign-currency liability you have already committed to.
A forward contract is an agreement to exchange one currency for another at a rate fixed today, for settlement on an agreed future date — typically up to 12 months ahead. It converts an unknown future cost into a fixed, budgetable number. You give up the gain if the market moves in your favour; that is the trade, and it is the whole decision. Cambridge Currencies charges no fee for a forward and processes payments through FCA-authorised partners Currencycloud (FRN 900199) and ScioPay (FRN 927951).
GBP
EUR
Live spot shown for reference. A forward rate is this rate adjusted by forward points.
GBP to EUR Exchange Rate History
What is a forward contract?
If you have a known euro or dollar payment landing in three, six or twelve months — a supplier invoice, a property completion, a staged project cost — a forward converts an unknown future cost into a fixed number you can put in a budget.
The forward rate is not a forecast, and this is the point most explanations skip. It is derived from the current spot rate, adjusted by a premium or discount reflecting the interest-rate differential between the two currencies — the Bank of England Bank Rate against the rate set by the other currency's central bank. Those adjustments are called forward points. Nobody at the bank is predicting where the rate will go; the maths simply carries today's rate forward at the cost of money.
How a forward contract works
Onboarding typically takes one to two business days. Once your account is open, a forward is arranged in four steps, and every trade is confirmed by phone with a dedicated dealer before it is booked.
- Open an accountRegister online or by phone and complete verification. There is no cost and no obligation to trade.
- Set the contractAgree the currency pair, the amount and the settlement date. Your dealer quotes the forward rate on the call, with the forward points visible in the number.
- Pay the depositTypically 5% to 10% of the contract value, paid on booking. It is not a fee — it is credited against the final settlement.
- Fix and deliverSettle the balance on the agreed date. Funds go to your beneficiary at the rate you locked, whatever the market has done since.
Worked example: a €180,000 supplier invoice
A UK retailer orders €180,000 of stock from an Italian manufacturer, payable in 90 days. Assume an illustrative GBP/EUR rate of 1.17 on the day the order is placed, so the expected cost is £153,846.
| Scenario | Rate at settlement | Unhedged cost | Hedged at 1.17 | Difference |
|---|---|---|---|---|
| Euro strengthens | 1.1000 | £163,636 | £153,846 | Forward saves £9,790 |
| Rate unchanged | 1.1700 | £153,846 | £153,846 | Identical |
| Euro weakens | 1.2400 | £145,161 | £153,846 | £8,685 forgone |
Note what this example does not claim: it does not say which outcome is likely. A 6% move in GBP/EUR over 90 days is unremarkable, in either direction. That is precisely the point — a forward is a decision about how much variance the business can absorb, not a prediction about the market.
What does a forward contract cost?
There is normally no separate fee for a forward contract. The cost is embedded in the exchange rate you are quoted, plus the forward points.
| Cost component | What to expect |
|---|---|
| Exchange rate margin | A specialist broker typically prices around 0.2% to 1% away from the interbank rate. A UK high-street bank typically prices 3% to 4% for the same contract. |
| Deposit | Usually 5% to 10% of the contract value, paid on booking. Not a fee — it is credited against the final settlement. |
| Forward points | The premium or discount from the interest-rate differential between the two currencies. This can work for or against you depending on the pair and the tenor. |
| Transfer fee | None. |
On a single £500,000 forward, the gap between a specialist margin and a typical high-street bank margin is in the region of £10,000 to £19,000 — on a contract that is otherwise identical.
When a forward contract is not the right tool
We would rather say this up front than sell a contract that does not fit the exposure.
- The payment is immediate and the funds are in hand. A spot transfer is simpler and cheaper.
- The exposure is a forecast, not a commitment. A forward is a binding obligation. If the underlying payment never materialises the contract still settles, and closing out early may crystallise a gain or a loss. Hedge contracted flows; treat forecasts separately.
- You have a target rate and flexible timing. A limit order may serve you better, with no deposit.
- The amount is small. Below roughly £25,000 the margin saving may not justify the process.
- You want the upside. A forward removes the downside and the upside together. If you genuinely want to stay exposed, say so — do not book a hedge you will resent.
Forwards are one of several tools. Our guide to FX hedging strategies compares them against market orders and window forwards, and forward contracts explained goes deeper on the mechanics.
Windows, drawdowns and rolls
Real completion dates move, which is why the contract shape matters as much as the rate.
Fixed forward
One amount, one settlement date. The cheapest and simplest shape, and the right one when the date is genuinely certain.
Window forward
A drawdown period rather than a single date, so you can settle at any point inside the window. Useful when a completion or shipment date is expected but not fixed.
Partial drawdowns
Take part of the contract early and leave the balance to run. Common on staged build costs and phased supplier schedules.
Rolls and extensions
If the date slips, a contract can usually be extended. The rate is re-priced for the new tenor by the forward points, so an extension is not free — agree the flexibility at the outset rather than under pressure.
Payments do not settle on a bank holiday in either currency, and daily cut-off times affect the delivery date. Your dealer will confirm both for the specific route.
"For a business with a known foreign-currency payment ahead, a forward contract is about removing uncertainty from the budget, not predicting the market. We talk every client through whether a forward genuinely fits the exposure before anything is booked."
— Anthony Bull, CEO, Cambridge Currencies
Regulation and your money
Cambridge Currencies is not itself FCA-authorised. Payments are arranged through FCA-authorised partners — Currencycloud (FRN 900199) and ScioPay (FRN 927951) — and client funds are safeguarded by those partners.
Being straight about the limits of that: the FCA states that if a non-bank payment provider goes out of business, "your money won't be protected by the Financial Services Compensation Scheme (FSCS)". Firms "must either put your money in a separate safeguarding account with a bank, or protect it with an insurance policy or similar guarantee", and if the firm fails "you should get most of your money back. But it may take some time to receive, and it may not be the full amount". Source: Financial Conduct Authority.
That applies to every UK currency broker, not only to us. You can verify any provider's permissions on the FCA Financial Services Register, and we would encourage you to.
Fix the rate on your next payment
If you have a euro or dollar payment landing in the next three to twelve months, a short call establishes whether a forward is the right tool for it — and whether it is not. Every trade is arranged by phone and confirmed with you before it is booked.
Frequently asked questions
What is a forward contract?
A forward contract is an agreement to exchange one currency for another at a rate fixed today, for settlement on an agreed future date — typically up to 12 months ahead. It fixes the cost of a payment you already know you have to make.
How much deposit is required?
Usually 5% to 10% of the contract value, paid at booking. It is not a fee: the deposit is credited against the final settlement amount. If the market moves substantially against the position before settlement, a further margin payment can be requested.
What does a forward contract cost?
There is no separate contract fee and no transfer fee. The cost sits in the exchange rate — roughly 0.2% to 1% away from interbank at a specialist broker, against 3% to 4% at a typical UK high-street bank. Forward points, reflecting the interest-rate gap between the two currencies, may work for or against you.
How far ahead can I book a forward contract?
Up to 12 months is standard. Longer tenors can be available for established relationships, though pricing widens as the tenor extends and the deposit requirement may increase.
Can I draw down early or in stages?
Yes, in many cases. Partial drawdowns can usually be arranged, and a window forward gives you a drawdown period rather than a single fixed date — which suits property completions and shipment schedules where the exact day is not yet settled.
Can I extend the contract if my date slips?
Yes. Rolls and extensions are possible if a completion date or shipping schedule moves. The rate is re-priced for the new tenor by the forward points, so an extension changes the economics slightly rather than being a free option.
What happens if the payment falls through?
A forward is a binding obligation, so the contract still settles on its maturity date. It can be closed out early at the prevailing market rate, which may produce a gain or a loss depending on how the market has moved. This is the main reason to hedge contracted payments rather than forecast ones.
Is my money protected?
Client funds are safeguarded through our FCA-authorised partners, Currencycloud (FRN 900199) and ScioPay (FRN 927951). Safeguarding is not the same as FSCS protection, which the FCA confirms does not apply to non-bank payment providers. You can check any provider on the FCA Financial Services Register.