Summer holiday nightmare: The pound is at a 7-year low against the euro
Time for a staycation? Reuters/Phil Noble
LONDON — British holidaymakers jetting off to Europe who haven't yet changed their money face misery, with the pound at a seven year low against the euro.
The pound dropped to its lowest level since 2010 on Wednesday —excluding a very brief period during last October's flash crash— as the strengthening single currency punishes the pound.
The euro/pound currency cross,which is generally how the two are measured against one another, briefly rose to £0.9141 during early trade on Wednesday. That marked the strongest the euro has been against the pound, bar the flash crash, since 2010.
That rally was quashed by the worst of the Eurozone debt crisis, which pushed the euro downwards.
The euro's recent rise against sterling illustrates the diverging economic fortunes of Britain and the eurozone since the Brexit vote. While the single currency area prospers — growth in Q2 exceeded expectations and ran at an annualised rate of 2.2% — the UK's currency is weak, growth is subdued and virtually all risks to the economic outlook are to the downside.
Here's the chart of the euro's rise:Markets Insider
Having hit that record low in early trade, sterling has recovered a little after the latest data from the Office for National Statistics showed that UK unemployment fell to its lowest level since 1975 at the last reading.
The euro has been on a tear against both the pound and the dollar so far in 2017, as investors take note of the improving fortunes of the bloc's economy. EU growth has recovered to its best levels since the eurozone debt crisis.
Meanwhile, the pound remains subdued thanks to British economic weakness and the uncertainty surrounding Brexit negotiations, both of which are expected to continue to negatively impact sterling.
Late last week analysts at Morgan Stanley forecast that the euro will be worth more than Britain's currency by the end of the first quarter of 2018.
In the bank's FX Overview paper at the end of last week, a team led by strategist Hans W. Redeker said that a combination of a stronger euro and a weakening pound will combine to make the euro more valuable than the pound for the first time in its history, and make it — in terms of pure value — the strongest major currency on the planet.
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