The plunging pound made one-to-one parity with the euro an expensive reality for British tourists yesterday, as the currency's slump deepened.
Thousands of skiers and holidaymakers heading for European resorts to celebrate the new year were feeling the pain in their pockets as the pound hit record lows against the single currency. On the markets the pound was still clinging to levels only a fraction above one-to-one with the euro.
On Bank of England figures, it closed in London at a low of €1.0199 - a value not seen since the euro's creation in 1999. Against the dollar the pound slid to a six-and-a-half year low of $1.4385 - compared with $1.99 six months ago. However, the pound's true euro value for travellers exchanging money was already well below parity, with typical tourist rates as low as €0.98. The Post Office was offering tourist rates yesterday of only €98.04 for every £100.
Experts said that, with the pound under pressure amid fears over Britain's darkening economic prospects, a one-to-one level with the euro in the markets was inevitable within days. “There is no good news for the pound coming up that I can see,” Mike Berg, an analyst with 4Cast, a consultancy, said. “Its fall may accelerate a bit. In January, you will see parity.”
Gerard Lyons, chief economist at Standard Chartered, the banking group, predicted that the pound would fall to €0.90 within a month.
Growing signs emerged that the pound's record lows against the euro were already changing holidaymakers' behaviour. A survey for travelsupermarket.com found indications that British tourists were beginning to avoid trips to the Continent. Almost a fifth of those questioned said that they would seek cheaper holidays.
The pound has lost a quarter of its value against the euro this year, and 15percent in the past month alone. In the latest sign of its vulnerability, the pound's overall value on its “trade-weighted index”, against a basket of currencies, hit lows not seen since 1975. The index fell to as little as 73.4 - sharply down from 97.93 at the end of 2007.
Although the slump in the pound makes travelling abroad much more costly, it offers some boost to the economy by making British exports cheaper in foreign markets. Economists said, however, that any benefits from this were being eliminated because the global recession meant that demand for exports was falling.
The drastically weak pound is also driving up bills for imported goods, particularly for foreign food products, as well as for oil and petrol.
Petrol prices have tumbled over recent weeks and yesterday hit their lowest for almost three years, averaging 87.79p a litre, according to the AA.
The sharp reversal in the cost of fuel at the pumps follows a fall in crude oil prices of 60 per cent since January to under $40 a barrel.
Petrol would almost certainly be even cheaper but for the weakness of the pound, which has meant that, when paid for in sterling, oil prices have dropped by only a more modest 45 per cent.
Pressure is being piled on the pound as markets bet that Britain is among the worst exposed of the world's big economies to the global crisis. The aggressive selling of sterling across markets is being aggravated as the Bank of England's unprecedented cuts in interest rates cut the returns earned on any funds held in the currency.
Official figures from the Land Registry yesterday confirmed that average house prices in England and Wales dropped by another 1.9 per cent last month, leaving them 12.2 per cent down over 12 months.
-----
DOOOOOOOOOOOOOOOOOOOOOOOOMED!
Thousands of skiers and holidaymakers heading for European resorts to celebrate the new year were feeling the pain in their pockets as the pound hit record lows against the single currency. On the markets the pound was still clinging to levels only a fraction above one-to-one with the euro.
On Bank of England figures, it closed in London at a low of €1.0199 - a value not seen since the euro's creation in 1999. Against the dollar the pound slid to a six-and-a-half year low of $1.4385 - compared with $1.99 six months ago. However, the pound's true euro value for travellers exchanging money was already well below parity, with typical tourist rates as low as €0.98. The Post Office was offering tourist rates yesterday of only €98.04 for every £100.
Experts said that, with the pound under pressure amid fears over Britain's darkening economic prospects, a one-to-one level with the euro in the markets was inevitable within days. “There is no good news for the pound coming up that I can see,” Mike Berg, an analyst with 4Cast, a consultancy, said. “Its fall may accelerate a bit. In January, you will see parity.”
Gerard Lyons, chief economist at Standard Chartered, the banking group, predicted that the pound would fall to €0.90 within a month.
Growing signs emerged that the pound's record lows against the euro were already changing holidaymakers' behaviour. A survey for travelsupermarket.com found indications that British tourists were beginning to avoid trips to the Continent. Almost a fifth of those questioned said that they would seek cheaper holidays.
The pound has lost a quarter of its value against the euro this year, and 15percent in the past month alone. In the latest sign of its vulnerability, the pound's overall value on its “trade-weighted index”, against a basket of currencies, hit lows not seen since 1975. The index fell to as little as 73.4 - sharply down from 97.93 at the end of 2007.
Although the slump in the pound makes travelling abroad much more costly, it offers some boost to the economy by making British exports cheaper in foreign markets. Economists said, however, that any benefits from this were being eliminated because the global recession meant that demand for exports was falling.
The drastically weak pound is also driving up bills for imported goods, particularly for foreign food products, as well as for oil and petrol.
Petrol prices have tumbled over recent weeks and yesterday hit their lowest for almost three years, averaging 87.79p a litre, according to the AA.
The sharp reversal in the cost of fuel at the pumps follows a fall in crude oil prices of 60 per cent since January to under $40 a barrel.
Petrol would almost certainly be even cheaper but for the weakness of the pound, which has meant that, when paid for in sterling, oil prices have dropped by only a more modest 45 per cent.
Pressure is being piled on the pound as markets bet that Britain is among the worst exposed of the world's big economies to the global crisis. The aggressive selling of sterling across markets is being aggravated as the Bank of England's unprecedented cuts in interest rates cut the returns earned on any funds held in the currency.
Official figures from the Land Registry yesterday confirmed that average house prices in England and Wales dropped by another 1.9 per cent last month, leaving them 12.2 per cent down over 12 months.
-----
DOOOOOOOOOOOOOOOOOOOOOOOOMED!
Comment