Pound 'set to bounce back to €1.20 in 2009'
S. Lambert, This is Money
19 December 2008
The pound could bounce back against the euro with a return to about £1 to €1.20 in the next six months, experts have suggested.
Bounce back: The pound could rise against the euro back to about £1 to €1.20
Tourists get less than €1 to £1
Pound sinks to all-time low
A series of dramatic interest rate cuts by the Bank of England and a raft of poor economic data have been blamed for a dive in the pound's value against the euro.
Today (Friday December 19, 2008) the pound stood at €1.075 on the currency markets, after a slight recovery from an all-time low of €1.046 hit yesterday.
However, economists say the pound has got caught between a depreciating dollar and a strengthening euro and it now looks undervalued.
- Pound vs the rest
Tourists have been getting
less than €1 for £1 at foreign exchange counters (today the rate stands at about €1.022). But while the short-term outlook for the pound against the euro is poor, it could improve in the first half of 2009.
The perception of a stronger Eurozone could be diminished in the near future, as more bad news arrives from its major economies and the European Central Bank is also forced to cut rates more dramatically.
Rajesh Agrawal, CEO of currency specialists RationalFX, said: 'The Eurozone appears relatively stable but this could be undermined as more and more economic data shows that such a large group of economies grouped together could fragment under recessionary pressures.
'The perception that it is stronger is simply not true and certainly isn't as safe as these figures would imply.
'Business confidence in Europe is at a low, especially in areas such as Germany which is at its lowest since 1982. This will increase pressure on the Eurozone, easing the pressure off the pound.
'We fully expect the pound to be back at the normal rate of around 85p against the euro (about €1.18 to £1) by March, and we also anticipate that the euro will bounce back against the dollar in the next three months as well.' The pound has fallen 17% against the euro since 7th October 2008, the day before the Bank of England began to slash
interest rates, dropping from money market spot rates of £1 to €1.28, to £1 to €1.06 yesterday.
http://www.thisismoney.co.uk/news/ar...9&in_page_id=2
