The Pound is currently trading above €1.24 against the Euro, which marks the best rate of exchange since November 2008. Uncertainty surrounding the future of the Eurozone has escalated in recent weeks as general elections in France and Greece have left financial markets reeling.
Euro investors were unsettled by Francois Hollande’s victory over Nicolas Sarkozy as the Socialist party member has vowed to renegotiate the newly formed fiscal compact. The worry is that if the Eurozone’s 2nd largest economic force stops playing by the rules, then struggling member states in the South will also start to renege on their promises.
In Greece the situation is even worse, with no party gaining a strong enough majority and 60% of the votes going to anti-austerity groups, the likelihood of Greece leaving the Eurozone has increased to 50-75% according to Citibank.
“A Greek exit could be catastrophic for the Euro as the threat of contagion across the 17-nation bloc would wreak devastating consequences for the region’s fragile banking sector.” Says Josh Ferry Woodard, Currency Analyst at TorFX.
All of this has combined to bring about the best Pound to Euro Exchange Rate for three-and-a-half years.
In November 2008 Democrat Barack Obama had just become the first African American President of the United States, Lewis Hamilton had just become the youngest ever Formula One Champion, India had just launched their first lunar mission, UK Prime Minister Gordon Brown had just announced his plans to raise the income tax for the first time since 1975, and the Eurozone had just entered its first ever recession.