British tourists and business travellers are facing record prices on the continent as Sterling plummeted to a new low against the Euro today.
The Pound edged closer to parity against the Euro on the money markets, sinking to 1.07 Euros at last night’s close. Whilst tourist currency exchanges are now offering an average of 97 Euros for £100, the first time in history the Pound has been worth less than a Euro.The Pound has now fallen 14 cents against the Euro in three weeks as the Bank of England cut the interest rate to two per cent in an attempt to prevent a deep recession.
Investors are shunning the Pound because the UK interest-rate is below that in the Eurozone and is predicted to fall to near zero.
The situation is exacerbated by Britain’s gloomy economic outlook, with growth predicted to be slower more than the Eurozone.
European breaks now cost British travellers up to 30 per cent more than this time last year, when travellers enjoyed an exchange rate of 1.40 Euros for the Pound.
Mark O’Sullivan, dealing director at Currencies direct, said: ‘This is likely to get worse as more investors lose confidence in the Pound.’
The bleaks economic data emerging from Britain adds more downward pressure on sterling. Short sellers are also betting on sterling continuing to fall, adding yet further pressure.
As thousands of tourists prepare for the Christmas exodus, experts warned that things would get worse and that further falls could be expected.
Airports also capitalise on the panic to buy currency, factoring wide profit margins into rates and charging high commission.
Glenn Uniacke, a currency specialist at MoneyCorp, said: ‘It’s the first time holidaymakers have seen such a bad deal in London. Our corporate clients were a little more prepared for this fall in value and have hedged, selling sterling ahead, but no one would have bought their skiing holiday money in the summer, would they?
‘The economic downturn is global, but there’s a perception that the UK’s problems are more acute so traders are dumping the pound.’