Pound hits new low against Euro
Updated on 10 November 2008
British holidaymakers in Europe have been hit in the pocket as the euro reached a record high against the pound.
At the low point in trading on Monday, one pound bought just under 1.22 euros - marking the currency's weakest performance against the euro since its launch in 1999.
The euro's strength comes in the wake of UK interest rates being slashed by 1.5% to 3% last week by the Bank of England.
The European Central Bank also cut rates, but lowered them by just 0.5% to 3.25%, giving the eurozone's currency more support.
The Bank of England's bolder cut was at first welcomed on hopes that it would ease the impact of recession, but markets also fretted over potential bad news ahead after the scale of the reduction.
The pound's fall below 1.22 came as markets mulled both moves and represented an attempt to break sterling out of a previously narrow trading range against the euro, currency experts said.
"It is more of a technical move than a fundamental move... but there is still a lot of uncertainty out there, a lot of nervousness," HiFX currency strategist Marc Cogliatti said.
Despite a punishing year for sterling against the euro - a year ago a pound bought 1.43 euros - holidaymakers should gain some relief next year as European economies slow.
Official figures due this week are set to confirm a recession in the Eurozone - defined as two successive quarters of economic contraction - after output fell by 0.2% between April and June.
Mark O'Sullivan, a director at Currencies Direct, said: "The euro is massively overvalued against a basket of currencies but at the moment that has not come through."
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