Page last updated at 13:22 GMT, Wednesday, 9 April 2008 14:22 UK

Pound falls to all-time euro low

Euro and pound notes
The pound's weakness is expected to hit UK holidaymakers this summer

The pound has touched a fresh all-time low against the euro, hit by market expectations that the Bank of England will further cut UK interest rates.

With the Bank widely tipped to trim rates to 5% from 5.25% on Thursday, one pound was worth as little as 1.2500 euros in early Wednesday trading.

Sterling later strengthened slightly, with one pound worth 1.2552 euros.

Interest rate cuts generally encourage investors to switch to other currencies that have a higher rate of return.

The falling pound

While the pound went as low as 1.2500 euros, conversely the European single currency touched as high as 80 pence.

Commentators say British holidaymakers are likely to notice the pound's weakness when they go on their 2008 summer holidays to eurozone nations such as Spain, France and Portugal.

The Bank of England is widely expected to cut rates on Thursday to ease growing economic and consumer jitters caused by the impact of the global credit squeeze.

Against the dollar, the euro was up slightly to $1.5710, while one pound was worth $1.9718.



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