Pound climbs against the euro

 

The pound hit a 22-month high against the euro today as fears grew about the strength of Spain's economy.

A pound bought 1.23 euros as the UK was seen as a "safe haven" after figures confirmed Spain was back in recession and nine Spanish banks had their credit ratings downgraded.

The drop in the euro will be welcomed by UK holidaymakers heading to the continent but will worry manufacturers trying to grow exports to Europe, the UK's biggest trade partner.

The pound at times rose to its highest point against the US dollar since September amid growing signs that the strong recovery in the US is starting to slow.

The UK is seen as a safe haven despite suffering a double-dip recession because it is one of the few large western economies to have held on to its cherished AAA credit rating.

Kathleen Brooks, a director at currency trader Forex.com, said: "The eurozone crisis is the key driver of why the euro has been weakening.

"The downtrack in the euro has been building up for a while. Things in the UK are not great, but in Europe they are worse."

She believes the pound will continue to gradually "grind" higher against the euro but it would take another escalation in the eurozone debt crisis for it to make substantial gains.

If the pound were to hit 1.24 against the euro, it would be at levels not seen since the recession in 2008, which wiped about 25% off the value of sterling.

Spain was the main focus of attention today after figures revealed its economy contracted by 0.3% in the first quarter of 2012, plunging it back into recession.

But numerous countries in the eurozone are struggling to bring in harsh austerity measures as their economies slip into recession or show lacklustre growth.

In France, socialist presidential candidate Francois Hollande is expected to try to unpick a recent eurozone treaty on debt reduction if he is voted in, while Holland faces an election after the government failed to agree its austerity package.

Prime Minister David Cameron has warned the debt crisis across the Continent is not even halfway through and has blamed it for the UK's current malaise.

Another reason that the pound has strengthened in recent weeks is that minutes from the Bank of England recently suggested it is less likely to embark on another round of quantitative easing (QE), or money printing, which weakens currencies.

In the US, however, the Federal Reserve has hinted that more QE could be on the cards if the economy deteriorates.

PA

News
Fatale attraction: Brigitte Bardot in her youth
people Biographer says cinema’s enduring sex symbol led a secret troubled life
News
newsGlobal index has ranked the quality of life for OAPs - but the UK didn't even make it into the top 10
News
people

Kirstie Allsopp has waded into the female fertility debate again

News
In 2006, Pluto was reclassified as a 'dwarf planet'
scienceBut will it be reinstated?
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
people
News
Researchers say a diet of fatty foods could impede smell abilities
scienceMeasuring the sense may predict a person's lifespan
Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
News
peopleStella McCartney apologises over controversial Instagram picture
News
Gillian Anderson was paid less than her male co-star David Duchovny for three years while she was in the The X-Files until she protested and was given the same salary
people

Gillian Anderson lays into gender disparity in Hollywood

Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
News
i100
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsA Welsh town has changed its name - and a prize if you can notice how
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Trainee Recruitment Consultant

£20000 - £25000 per annum + Uncapped Commission, 1st yr OTE £30-£40k : SThree:...

Middleware Support Analyst

£45000 - £50000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Senior Java Developer/Designer

£400 - £450 Per Day: Clearwater People Solutions Ltd: My client are looking fo...

Domino Developer and Administrator

£40000 - £45000 Per Annum + benefits: Clearwater People Solutions Ltd: Domino ...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?