Sterling has risen to its highest level against the euro since November 2008, when rate cuts began in earnest, on fears about the resilience of the single currency. The Bank of England launched QE in March 2009. Today, the pound strengthened 0.2 per cent to €1.2675. At its weakest point in December 2008, £1 bought just €1.02 reports The Telegraph.
The strengthening pound, which is now not far off its €1.35 highs of early 2008, is making UK exporters less competitive. The eurozone is a key trading partner, accounting for 40 per cent of all goods exported from the UK. In April, the trade deficit soared due to a slump in exports, although the gap was narrowed slightly in May.
Ross Walker, UK economist at Royal Bank of Scotland, said that the main factor behind Britain’s persistent trade deficit was the weakness of demand in the eurozone, but he added that the strengthening currency “is certainly not helping”.
Currency experts said the pound was being supported by fears about the euro, and the fact that other currencies were more “fully valued”.