The UK pound is at its highest level against the Euro in seven years.
The dramatic slide follows the European Central Bank’s announcement that it will pump 60 billion euros a month into the Eurozone’s economy. As a result of the bank’s quantitative easing programme, investors have been selling the euro, causing the pound to reach an all-time high of 1.34 euros.
The euro also hit an all-time low against the US dollar of $1.115, recovering slightly subsequently.
The increasingly weakening euro brings mixed blessings for the UK. Cheaper foreign holidays within the Eurozone are an advantage but this is offset by the increased hardships UK exporters will face.
Governor of the Bank of England, Mark Carney, said that the move by the European Central Bank, (ECB), was a welcome step in the preservation of the likelihood of prosperity within Europe in the medium term.
Roger Bootle, the chairman of Capital Economics did not agree, however, calling it a ‘net negative,’ because it will make life much harder for British export enterprises and much easier for European firms exporting to the UK. Foreign holidays may be cheaper but that will be of little use to those who have lost their jobs because of the rise of the pound/euro exchange rate.
The euro has been steadily falling in value against the pound for several months as the market anticipated the recent action by the ECB. It has lost around 9 per cent of its value against sterling during the past 12 months.
The ECB’s 1.1 trillion euro stimulus programme should lower the cost of borrowing and encourage European businesses and consumers to increase their spending throughout the 19 nation Eurozone.
Share markets throughout Europe all responded positively, with shares in Athens rising by more than 5 per cent.
