Pound to euro exchange rate – sterling tumbles after Bank of England announces interest rate rise
The Bank of England raised rates by 0.25% to 0.5% as predicted this afternoon
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THE pound has plunged against the euro following the Bank of England's announcement that interest rates will rise by 0.25 per cent.
Sterling dropped 0.84 per cent from 1.1345 five minutes before the midday announcement to 1.1250 just 20 minutes after.
The rate means £1 will get you around €1.12 compared to €1.14 this morning.
Most economists expected the central bank to raise its official cost of borrowing to from 0.25% to 0.5% after the economy grew more quickly than expected in the third quarter of this year.
It is the first time rates have been increased since 2007.
Minutes of today's meeting show the Monetary Policy Committee will move cautiously before agreeing any future interest rate rises.
It says: "The MPC now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to target.
"All members agree that any future increases in Bank Rate will be at a gradual pace and to a limited extent.”
What has happened to the euro conversion rate in the last few months?
Sterling is down around 12 per cent against the euro and 10 per cent against the dollar compared with before the EU Referendum of June 2016.
For investors, a rate hike is good news, as it means the pound gains more value while it's sat in buyers' bank accounts.
A rise in interest rates can also reflect an increase in general economic confidence, which will increase sterling's relative value on financial markets.
However, some analysts think traders may be awaiting signs of better relations in Brexit talks before buying into the pound, with the markets still jittery thanks to the uncertainty involved in the divorce process.
Where is the best place to get euros?
Euros can be bought at supermarkets, the Post Office and currency specialists – but rates vary massively.
The best rates can often be found at specialist online outlets, such as Travelex, which will deliver your cash directly to your home.
Alternatively, FairFX offers currency cards which you can load up with sterling and then spend abroad like a debit card.
Travellers can use comparison sites, like MoneySavingExpert’s TravelMoneyMax, to find the best rate.
If you order in advance and pick up the cash then you’ll most likely get a better rate than if you walk in.
You can also buy last-minute currency at the airport, but expect to be hit with poor rates.
It’s almost always much cheaper to buy your currency before you get to the airport.
The rates you’ll see above are the “spot” currency rate that is traded on the market.
These are different to the rates offered by currency exchange businesses, but changes in the spot rate do have an effect on how much cash you get.
How to get the best holiday money rate
WE spoke with Hannah Maundrell, editor-in-chief at money.co.uk to find out how you can guarantee the best rate when you go on holiday
- Don’t buy cash at the airport – you’ll always be able to beat the rate with a bit of forward planning
- Compare travel money companies online – Factor in delivery costs and choose the option that gives you the most cash to spend on holiday. If you’ve left it until the last minute order online for airport collection so you get the best of both worlds.
- Use comparison tools – MoneySavingExpert’s TravelMoneyMax enables you to compare pick-up and pre-order rates.
- Don’t pay for travel money with a credit card – it’s likely you’ll be charged a cash withdrawal fee which adds to the cost.
- Top up a prepaid card to lock in your rate now – Choose your card and read the T&Cs carefully as some apply hefty fees. WeSwap, FairFX and Caxton FX are all worth checking out.
- Always choose to pay in the local currency rather than sterling – This will help you avoid sneaky exchange fees
