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The BBC's Dharshini David
"The government is likely to want to join the Euro at a lower exchange rate"
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Friday, 8 June, 2001, 16:20 GMT 17:20 UK
Pound under political pressure

Pound sterling has fallen to yet another 15-year low on the foreign exchange markets, following the resignation of Tory leader William Hague.

The comprehensive victory of Labour in Thursday's general election and the disarray of the Tory opposition seems to have convinced markets that the United Kingdom is now more likely than ever to join Europe's Economic and Monetary Union.

The pound briefly dipped below $1.3790 and 1,6230 euro, before recovering slightly.

Another reason for the pound's slide was an upsurge for the euro, which was boosted by selling of yen.

Overall, the pound is still relatively strong against the euro, and investors believe that the UK would join the eurozone only at a much lower exchange rate.

During the past year, UK exporters suffered because of the strong pound, and the pound's slide comes in anticipation that the exchange rate will be adjusted accordingly.

Blair's promise

Before his re-election, Prime Minister Tony Blair had promised to make a decision on whether to hold a referendum on joining the euro within two years of the election.

In the meantime, eurosceptics and euro fans are getting ready to fight the euro campaign.

The "No euro" campaign, a joint venture of Business for Sterling and New Europe, run double-page adverts in two big-selling tabloid newspapers, criticising the single currency.

Travel money

Sterling's fall comes at a bad time for UK holidaymakers who will get less for their money when they go abroad.

This is particularly true for those going to the United States, but even people going to European countries will notice the difference as the UK currency has slipped against the euro as well.

Companies importing goods and services from the US or other countries will also lose out because their costs will rise.

But for UK exporters, a weaker currency is good news because their products will be cheaper and therefore easier to sell.

A weaker pound also makes it cheaper for people from other countries to come on holiday to the UK.

This will be welcomed by the tourist industry which has suffered a sharp fall in trade as a consequence of the foot-and-mouth epidemic.

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See also:

24 May 01 | Vote2001
Is the UK ready for the euro?
08 Jun 01 | Business
Q&A: The falling pound
08 Jun 01 | Vote2001
Labour faces euro decision
30 May 01 | Business
What UK industry wants from the euro
24 May 01 | Business
Pound stays low as UK exports slip
22 May 01 | Business
German business confidence slumps
27 Apr 01 | Business
French economy outshines Germany
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