Boost for sunseekers as pound hits highest level against euro for two years
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The pound has hit its highest level against the euro for nearly two years in a boost for British holidaymakers who are enjoying a half-term break.
Sterling climbed to just below €1.18 versus the single currency, its strongest level since August 2022 – before later giving up some of its gains.
The UK currency has strengthened against its continental counterpart thanks to the likelihood of Bank of England interest rates remaining higher for longer than in the eurozone.
Markets are betting that the UK will see just one interest rate cut this year, in September, while the European Central Bank (ECB) is seen as likely to cut twice in 2024, starting next week.
The pound has also been firming against the US dollar, hitting a two-month high of $1.28 earlier this week before sinking back to just over $1.27 yesterday.
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Sterling’s strength against the euro provides a boost to Britons seeing their pounds stretch further at Paris boulangeries or Portuguese golf resorts.
But it is bad for exporters as it makes their goods more expensive for overseas customers.
Yesterday’s movements in the exchange rate came in reaction to German inflation data though none of the figures did anything to disrupt expectation of a June ECB rate cut.
Solid recent UK economic data is also shoring up sterling.
Analysts at MUFG bank said: ‘We continue to see a build-up of evidence pointing to a real GDP recovery that is more robust than expected as the UK finally works through the energy price shock from 2022-23.’
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