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euro vs pound

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The euro has reached an 18-month high against US dollar as the prospect of a US interest rate rise recedes.

The European currency hit $1.20 for the first time since January 2015.

Hurricane Harvey’s impact has led analysts to assume the Federal Reserve will not want to risk curbing economic growth and fears over North Korea’s activities have unnerved investors.

A rise in interest rates tends to draw investors to a currency, taking advantage of the higher returns.

Meanwhile, the euro has itself been gaining against a range of currencies.

Against the dollar, the euro has risen by almost 15% so far this year.

Image source Public Domain Pictures

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The euro has strengthened in recent months, as the eurozone’s economy improves and markets predict the European Central Bank could start to cut back the money-printing program it has been running to repair the ravages of the eurozone crisis and credit crunch of the late 2000s.

The dollar was also undermined by August 25 annual meeting of central bankers at the Jackson Hole resort in Wyoming at which Federal Reserve chief Janet Yellen’s speech gave no hint that the central back was planning any policy change that would support the dollar.

At the same event, European Central Bank President Mario Draghi did nothing to talk down the euro.

Euro strength has left the pound at its weakest for almost a year. It buys 1.0759 euros in the wholesale currency markets, making a euro worth a much as 92.95p.

Sterling buys $1.2955 currently.

Tourist rates tend to be below those of the markets, sometimes by quite a bit.