10th March 2015
The pound has climbed to a seven-year high against the euro, following the start of the European Central Bank (ECB) quantitative easing programme yesterday.
Sterling rose 0.45% to reach €1.40 for the first time since December 2007, in a major boost to the spending power of UK holidaymakers travelling to the Eurozone.
Last year, the pound was trading at €1.205, meaning Britons could expect to get around €1.18 for every pound they exchanged, according to the BBC.
Simon Phillips, head of retail at travel money specialist, No.1 Currency, said: “A tumbling Euro means power to your Pound. British holidaymakers heading to the eurozone this Easter will enjoy rates not seen since pre-credit crunch.
“A family exchanging £600 today will get over €100 more to spend on the kids than they would have done last year. Today, £600 will get you around €820 compared to just €707 a year ago.
“Although many are predicting the Euro will fall further, if you’re heading to Europe in the next few weeks, it is still worth changing some of your Pounds now to take advantage of this exceptional rate.”
Sterling’s rise against other currencies (most notably the euro) has prompted a 60% year-on-year increase in Hargreaves Lansdown clients fixing their exchange rates for upcoming currency requirements
Chris Saint, head of currency dealing at Hargreaves Lansdown, said: “Following yesterday’s launch of the ECB’s QE programme, the pound has risen to seven-year highs above €1.40 versus the euro; a level not seen since the early days of the financial crisis.
“Doubts still linger over Greece’s long-term membership of the euro despite tentative agreement on a bailout extension. A weaker euro should provide a tailwind to the euro zone’s exports, but it will be some time before we can judge whether the ECB’s newly launched bond-buying programme will give the necessary boost to growth and inflation across the region. Additionally, the pound’s continued dominance cannot be fully assured ahead of the uncertainty arising from another tightly-contested UK general election on 7 May.
“In recent weeks, sterling has also reached its highest level in more than five years against other popular currencies such as the Australian and Canadian dollars, which have been hurt by weaker commodity prices.”
The growing strength of the pound against the euro is good news for expat pensioners. Paul Fidell, investment expert at Prudential, explained: “The strength of the pound against the euro means State Pension payments are higher than ever before for expat pensioners. Retiring abroad can feel like riding an income rollercoaster at times, as State Pension spending power is directly affected by currency fluctuations. At the moment however, these currency movements are very much in favour of those retired overseas. If the pound stays at this level, the full State Pension will be worth €8,441 a year when the new tax year begins in April.
“Anyone considering retiring abroad should consult a financial adviser to ensure they are prepared to cope with income volatility and an unfamiliar tax regime.”