British holidaymakers were provided a welcome boost this week in relation to currency exchange with thanks to the pound hitting a seven-year high against the euro. The euro is now worth around €1.33 to every pound, an increase of 11% compared to last year, and 25% since 2008.
This is a result of market uncertainty following the left-wing party Syriza’s victory in the Greek elections on Sunday which has led to the euro’s weakening against both the dollar and the pound. Sterling has also gained against the euro because of the European Central Bank’s plans for quantitative easing.
But could the euro fall even further? Should holidaymakers hold off buying their euros?
It’s a very difficult call to make, because so many factors can influence the relationship between currencies. In its broadest terms, the currencies are a bellwether of the health of the economies where they are used.
If the deflation problem in Europe is worse than expected, but doesn’t take such a strong hold in Britain, then sterling should keep gaining on the euro.
We put your question to a broker, who thought it was better to act now.
Mariette Ferreira of FairFX, a currency specialist, said: “After recent market shake-ups with the Swiss Central Bank deciding to remove their 1.20 minimum exchange rate floor against the euro, and the European Central Bank deciding to introduce a quantitative easing package worth €1.1 trillion, the pound is enjoying highs at levels last seen seven years ago.
“Foreign exchange markets have been very volatile recently and various factors could impact the current rate levels to strengthen it further or weaken it. Forthcoming UK elections and announcements from the new Greek government are expected to increase uncertainty in the markets and potentially weaken sterling.”
Ms Ferreira said that at these levels, “travellers would be wise to make the most of the current currency exchange rate”.
Either way, make sure you always buy your holiday currency the cheapest possible way…….
Published via The Telegraph 22/02/2015