How do you make your holiday money go further?
After an uncertain couple of years, British holidaymakers have looked on gloomily as the pound has bombed in value against other popular currencies.
A number of factors, including record low interest rates, have led to sterling's broad decline since the credit crunch hit, leaving Brits with much less
bang for their buck when making trips to Europe and the United States.
In March 2007, Â£1 would have bought you 1.5 euro* - today it would get you around 35 cents less. The picture is even worse when looking at the
dollar; before the financial crisis, Brits could enjoy exchange rates of $2 for every pound, but that has dropped dramatically to around $1.5 to the
pound. However, with the storm clouds of the recession seemingly past, the big question now is where will sterling go next.
What does the future hold? In the immediate future, things are not looking great for the pound. As odds on a hung parliament are made ever-shorter
by bookmakers, political uncertainty is proving to be a dead weight around the neck of our currency. Part of the reason for this is that a lack of
â€˜strong', single party leadership is typically seen as bad for the economy, and in turn bad for plans to tackle the country's gaping budget deficit. This,
understandably, leads investors to look elsewhere and means that the pound continues to struggle compared with its main competitors.
As David Clements, currency trader at Caxton FX, explains: "Political uncertainty, even in normal time, is always bad for the local currency." However,
in this instance, there is the "added element of an enormous public debt to service over the coming decade", which makes the pound look even less
attractive to potential businesses looking to put money into the country. As a result, he warns that holidaymakers should expert further falls throughout
the election campaign unless a clear frontrunner emerges. (If you're still undecided, just follow this link to compare the three major parties' manifestos).
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