Pound/Euro rates hit best in nearly 4 years - Fri 13th July 2012

Pound/Euro rates hit €1.27, best in nearly 4 years

The reasons for the gains were continuing doubts about the currency bloc's ability to activate bailout funds help bailout countries struggling to repay its debts. Investors worldwide have been dumping the single currency in favour of safer havens such as the US Dollar.

The reason people are shunning the Euro is due to the lack of progress towards solving the bloc's debt crisis. Adding to the overall bearish mood towards the euro, Italian Prime Minister Mario Monti said on Tuesday his country could be interested in tapping the euro zone's rescue fund for bond support. This came after Spain announced a further round of austerity measures following their €30bn bailout earlier in the week.

Will rates fall back away?

Possibly. We have already seen a decline since hitting a peak earlier this week. The deepening crisis in the euro zone is a huge risk to the UK economy because the region is Britain's largest trading partner. Bank of England governor Mervyn King on Tuesday warned the British economy was showing few signs of recovery and analysts predicted output would prove to have remained sluggish in June due to a double holiday.
The Government and Bank of England don't want a high GBP/EUR rate - it's hurting our exports and stalling our recovery. There is a good chance of an interest rate cut to try to pull the rate down to make the Pound more attractive.
Indeed we have seen several times in the last few years the BoE talking the Pound back down, and if this happens the rate may fall away.

The case for rates climbing further

Of course rates falling is not a given, and nobody can predict exactly what will happen. Should we see further weakness in the Eurozone then there is every chance rates could pull higher, assuming we don't see the UK powers try to weaken Sterling.
Many forecasts do suggest rates may climb, however we have seen such forecasts before only to see a drop.

Extract from information supplied by Foremost Currency Group.

We say - good to buy some Euros now and secure your spending money. Look at our Blog for currency card and lock in the rate.

Posted by Bruce Gibson

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