Euro fears benefit the pound

The Momentum UK Team 06 January 2012

The pound has benefited against the fall of the euro following concerns over the mounting debt of eurozone countries and banks.

The financial crisis in Europe has seen the euro fall to a 16 month low against the dollar and pound as traders air caution.

As a result the euro fell $1.2780 against the dollar and 82.52p against the pound, the lowest rate since September 2010.

Fueled by angst over the debt crisis, economists at the international Monetary Fund (IMF) warned Asian banks about European financial instability, dropping the euro to an 11-year low against the yen.

Euro concerns have pushed the sterling up by 2.9% against nine other currencies in the past 6 months. After the Japanese yen and US dollar, the pound is now the third-best performer.

This will come as good news for Britons planning to move or holiday on the continent. Holiday makers converting their money following this drop in the euro will can expect a €1.21 for every pound, the most competitive rate since November 2008.

Although holiday makers exchanging small amounts of money will notice a slight increase in their holiday purse, those making large purchases - such as buying property abroad - will notice strength of the sterling the most.

William Poole, FX Strategist at FC Exchange, said: "It's worth buying [euros] while it's hot. The euro crisis will have to be resolved at some point and when that happens the euro will only strengthen again."