Forward Contracts — Fix FX for Future Payments
Lock today’s rate for a future date. Plan with confidence.
Designed for larger transfers and planned dates.
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 date in the future — typically up to 12 months ahead. It removes exchange-rate uncertainty from a payment you already know you have to make.
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, budgetable number. You give up the upside if the market moves in your favour. That is the trade.
The forward rate is not a forecast. 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.
How a Forward Contract Works
1) Open an account
Onboarding typically takes one to two business days. We guide each step.
2) Set your contract
Agree the currency pair, the amount and the settlement date by phone.
3) Pay the deposit
Typically 5% to 10% of the contract value, paid on booking.
4) Fix and deliver
Settle the balance on the agreed date. Funds go to your beneficiary at the locked rate.
Every trade is confirmed by phone with a dedicated specialist before settlement.
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 | GBP/EUR at settlement | Unhedged cost | Hedged at 1.17 | Difference |
|---|---|---|---|---|
| Euro strengthens | 1.10 | £163,636 | £153,846 | Forward saves £9,790 |
| Rate unchanged | 1.17 | £153,846 | £153,846 | Identical |
| Euro weakens | 1.24 | £145,161 | £153,846 | Forward costs £8,685 in forgone upside |
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 your business can absorb, not a prediction.
For more worked examples across importers, exporters and rolling monthly programmes, see our full guide to forward contracts for UK businesses.
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.
| Cost component | What to expect |
|---|---|
| Exchange-rate margin | A specialist broker typically prices 0.3%–0.8% above the interbank rate on transfers above £25,000. A UK high-street bank typically prices 2%–4% for the same contract. |
| Deposit | Usually 5%–10% of the contract value, paid on booking. It is 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. |
| Transfer fee | None. |
On a single £500,000 forward, the difference between a specialist margin and a typical bank margin is roughly £6,000 to £16,000.
Why Choose a Forward Contract
Rate certainty
Fix your rate now. Remove future rate risk.
Cash flow planning
Match payments to budgets and timelines.
Flexible drawdowns
Take part of the contract if needed.
Rolls and extensions
Extend terms if plans shift, albeit with conditions.
When a forward contract is not the right tool
We would rather tell you this up front than sell you a contract that does not fit.
- 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 depending on where the market has moved. 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.
Forwards are one of several tools. Our guide to FX hedging strategies compares them against market orders and window forwards.
Practicalities and Timing
Delivery and windows
Set a fixed settlement date, or a delivery window if the date may move.
Early drawdown can usually be arranged.
Holidays and cut-offs
Payments do not settle on local bank holidays in either currency.
Daily cut-off times affect the delivery date — ask your specialist for the route you need.
Regulation and your money
Cambridge Currencies arranges transfers through FCA-authorised payment partners — Currencycloud (FRN 900199) and ScioPay (FRN 927951). Client funds are safeguarded by those partners at a credit institution, in line with UK safeguarding rules.
Being straight about the limits of that: the FCA notes that funds held by payment and e-money firms are not protected by the FSCS in the way bank deposits are. Instead, firms must safeguard customer money so it can be returned if the firm fails. Safeguarding is not the same as FSCS cover — and that is true of every UK currency broker, not just us.
You can verify any provider’s permissions yourself on the FCA Firm Checker. We would encourage you to.
“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
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Forward Contracts — FAQs
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.
What does a forward contract cost?
There is no separate fee and no transfer fee. The cost sits in the exchange rate: a specialist broker typically prices 0.3%–0.8% above the interbank rate on transfers above £25,000, against 2%–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?
Up to 12 months is standard. Longer tenors of up to 24 months can be available for established relationships, though pricing widens as the tenor extends.
Can I draw down early?
Yes, in many cases. Partial drawdowns can usually be arranged, and a window forward gives you a drawdown period rather than a single date.
Can I extend the contract?
Yes. Rolls and extensions are possible if a completion date or shipping schedule slips, though terms will apply and the rate is adjusted for the new tenor.
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 does not apply to currency services from any UK broker. You can check any provider on the FCA Firm Checker.
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 will establish whether a forward is the right tool for it — and whether it is not. Every trade is arranged by phone with a dedicated specialist, and confirmed with you before it is booked.
Guidance only, not a personal recommendation. Sources: Bank of England — Bank Rate · FCA — safeguarding requirements · FCA Firm Checker.