Rise of the euro

Last Modified: 09 Apr 2008
By: Harry Fawcett

The pound plunges to new record depths against the euro, hitting British holidaymakers planning trips to the continent.

Holidaymakers today became the latest victims of Britain's economic woes with the pound now at a historic low against the euro.

After yesterday's dramatic fall in house prices, anyone booking a European vacation faced a euro costing 80p, higher than at anytime since the euro came into being.

The pound's fall came as the International Monetary Fund lowered their forecast for UK economic growth.

The chancellor Alistair Darling insists the British economy is resilient enough to withstand the current financial turbulence. Harry Fawcett reports.

A week ago today the Royal Mint launched a brand new pound as part of a redesign of the national coinage. The trouble is, it's already worth less than it ever has been, at least in Europe.

This morning, £1 bought you just €1.25 - the pound's lowest figure against the single currency in the euro's nine year history.

The explanation for all this? Among other things, interest rates. The European Central Bank - worried about inflation despite the economic slowdown is likely to keep its rates higher for longer than the Bank of England, which is widely expected to cut the rate of borrowing tomorrow.

The falling pound is of course a sign that things are far from rosy in the London financial garden. Just last month the chancellor, in his budget predicted growth of between 1.75 and 2.25 per cent this year; and between 2.25 and 2.75 in 2009

Much less optimism this morning from the International Monetary Fund - predicting growth of just 1.6 per cent in both years.

The IMF is not just concerned with the UK. It's reduced its global growth forecasts too, and says the fallout of the credit crunch could cost as much as £500bn. It's not just Brits abroad who could be in for a gloomy summer of 2008.