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Pain for holidaymakers as pound tumbles to 16-month-low against the euroThe pound has fallen against world currencies in the first few months of 2013GBP fell to a 16-month low against the euro affecting many UK travellers
Fall against the US dollar hit a nine-month low yesterday
23:54 GMT, 20 February 2013
08:39 GMT, 21 February 2013
British holidaymakers were last night warned to expect less cash in their pockets when they head abroad as the value of the pound tumbles.
Sterling fell to a 16-month low against the euro and a nine-month low against the US dollar yesterday.
The pound has fallen 5.5 per cent this year against a basket of world currencies – the second worst performance among the world’s major economies behind the Japanese yen. The slump has pushed up the cost of travelling abroad for Britons, with everything from hotel rooms in New York to ski passes in the Alps far more expensive.
Tough journey: The GBP drop against the euro and the US dollar is going to hit British travellers hard with holidays becoming more expensive
Analysts warned that the slump was likely to continue in the coming months as Britain teeters on the brink of a triple-dip recession and the national debt spirals higher.
‘The market has sterling in its cross hairs,’ said Gavin Friend, a currency strategist at National Australia Bank in London.
Lee McDarby, an expert at banking group Investec, said: ‘2013 just goes from bad to worse for the pound.’
The pound fell to as low as 1.14 euros against the single currency and to below $1.53 against the dollar on the foreign exchange markets.
Sterling was trading above 1.23 euros early this year and at close to 1.29 euros in July last year – meaning it has fallen 11 per cent in just seven months.
Bad start: The pound has fallen 5.5 per cent against a number of world currencies in the first months of 2013 (file photo)
It means that 500 is now worth just 570 euros compared with the 645 euros a British holidaymaker would have got last summer when the pound was at a four-year high.
David Swann, an expert at foreign exchange group Travelex, said the latest slump ‘comes as yet another blow to British holidaymakers’.
He said: ‘For those heading to the
eurozone, this means they are getting the worst rate since October 2011.
This isn’t great news for cash-strapped Brits.’
‘2013 just goes from bad to worse for the pound.’
– Lee McDarby, Investec banking group
The pound has not suffered such an aggressive fall since the financial crisis and it is feared the slump has further to go as the chances of a disastrous break-up of the eurozone recede, at least for now, and Britain’s coveted AAA credit rating comes under pressure.
Ishaq Siddiqi, market strategist at trading firm ETX Capital, said: ‘Sterling finds itself under renewed pressure as the possibility of a ratings downgrade looms ever larger.
‘If indeed the UK does lose its AAA credit rating, then any last embers of a safe haven type environment, established because of the even weaker performance of rival economies, would likely dissipate, especially if investors decide, rightly or wrongly, that the eurozone and US are finally emerging from the doldrums.’
Samuel Tombs, UK economist at Capital Economics, said: ‘Sterling’s sharp drop against the euro seems to have reflected markets’ increasing belief that the economic outlook for the UK is broadly as bad as it is in the eurozone.’