Page last updated at 13:30 GMT, Tuesday, 30 December 2008

Record low rates for UK tourists

Euro and pound notes
UK holidaymakers are getting fewer euros for their pounds

UK holidaymakers heading to Europe over the New Year will get fewer euros for their pound than at any time since the introduction of the euro.

While the official pound euro rate edges towards parity, customers on the High Street are already getting less than 1 euro for their pound.

But exchange rates vary between foreign currency brokers.

Many of the best deals can be obtained from smaller, online providers, rather than High Street bureaux de change.

Varying rates

The Post Office is offering just 98.04 euros for 100 while Thomas Cook will give you 99.50 euros.

"We effectively hit parity on the High Street a while ago, and we're now looking at record lows," said Alex Dunn at Caxton FX.

At Travelex, holidaymakers would get 100.15 euros and at M&S they would get 99.42 euros for 100.

There are also big differences between the dollar rates on offer. One hundred pounds would get $139.40 at Thomas Cook and $137.76 at the Post Office.

Pound vs euro

The reason why High Street rates are much lower than the official rates is because foreign exchange bureaux will take 4% to 5% off the rate for themselves, said Mr Dunn.

This is how they make money and cover themselves should the official rate move dramatically during the day.

The official pound euro rate is 1.024 euros, while the official pound dollar rate is $1.446.

A better deal

But tourists may be able to get better rates away from the High Street from specialist online foreign exchange brokers that do not have the overheads that come with maintaining shops.

Rates are likely to fall further as the pound continues to weaken against the euro. If official parity is reached then UK tourists are likely to get just 0.92 euros to the pound on the High Street, said Mr Dunn.

Analysts believe the pound will weaken further as interest rates in the UK are lower than those in the eurozone, which makes the pound less attractive to foreign investors.

Many also believe that the economic slowdown in the UK will be more severe than in the eurozone, which means the Bank of England could be forced to lower interest rates from their current level of 2%.

Interest rates in the eurozone currently stand at 2.5% and the European Central Bank has hinted that further rate cuts are unlikely early in the New Year.

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