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HOLIDAYING BRITS should think about booking their trip abroad to places such as Turkey, Mexico and Egypt as an annual study reveals the list countries where currencies are currently undervalued against the Pound.

According to researchers, the pound goes much further in countries where the local currency is not priced at the level of its actual buying power – in other words, the cost of food and drink will be much cheaper despite what the actual exchange rate is at the time you change your money.

Popular destinations like the US or Europe fall foul of the study as it shows that the Dollar and Euro are both overvalued against the Pound by 19.4% and 13.7% respectively. This means that if you’re looking for the cheapest destinations, avoid booking a holiday to the US or a Eurozone country as it will cost you even more than the actual exchange rate implies.

The ‘Big Mac’ study is carried out every year by The Economist. It compiles a list of countries where the local currency is either over or undervalued against the Pound by using the price of a Big Mac as a benchmark. The reason for using a Big Mac is because the ingredients remain the same throughout most places in the world which makes it a good item to compare and work out the purchasing power of the currency.

For example, if the price of a Big Mac in Switzerland is SwFr6.50 and in the UK it costs £3.29, the relative cost is £5.25. This is based on the difference in the implied exchange rate worked out between the two item costs and the actual exchange rate.

Paul Brewer, CEO of Currency Online Group said:

“The ‘Big Mac’ study is a really interesting measure of how currencies are valued and therefore holidaymakers should keep an eye on those that are undervalued as their pounds will go much further in those countries. When exchanging travel money, it’s easy to look just at the exchange rate, but if it’s going to be relatively expensive to spend on food and drink whilst there, it’s somewhat misleading."

“The countries we would recommend looking at based on the study are Turkey, Mexico, Egypt and South Africa. There are some great cultures and sights to explore but their currencies are also undervalued so you can do even more whilst there on the same budget without worrying you’re spending too much”.


‘Big Mac’ study – The Economist

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