The pound has been tipped to return to the levels seen before the Brexit vote after being a strong competitor to the euro for nearly three years.
As sterling rose to €1.2157 against the same currency – the highest since March 2022 – a City-based stockbroker said it could reach €1.30 next year.
The pound was last at those levels before Britain voted to leave the European Union in June 2016.
The forecast came as the European Central Bank (ECB) looked set to cut rates in the euro zone by 3 percent today in a bid to jump-start the ailing economy, which has dragged on. by the problems in Germany and France.
And the Federal Reserve is also on track to cut rates in the US next week after official indicators showed that inflation rose only from 2.6 percent in October – to 2.7 percent in November.
However, the Bank of England is expected to leave the interest rates in the UK unchanged at 4.75 percent next week, to the dismay of millions of borrowers.
Rally: Sterling has risen to €1.2157 against the same currency – its highest level since March 2022
Lower interest rates tend to weaken the currency, so the prospect of a rate cut in the euro zone – but not the UK – has pushed the euro down against the pound.
Neil Jones, managing director of foreign exchange specialist TJM, said he expected interest rates in the euro zone to fall to 1.5 percent next year from 3.25 percent before the recession. of today to 3 percent.
‘The ECB is on a path where interest rates are about to fall, possibly to shocking levels,’ he told the BBC.
‘We know that the political and economic crisis in Germany and France will push the ECB down.
Meanwhile, the Bank of England will remain open until December. But you can see how interest rates in the UK and the pound are set to stay higher. I’m looking for €1.30-plus, so another look at pre-Brexit levels.’
Jones admitted he was ‘a bit off’ in his prediction but said most people would agree with him within months.
Chris Turner, head of international markets at ING, said that if the pound rises above 1.22 euros there will be plenty of news about the currency returning to pre-Brexit levels. He added: ‘We think sterling will continue to perform well in the coming months.’
Joe Tuckey, head of currency analysis at Argentex, said: ‘Reaching the €1.30 levels seen before Brexit is possible but may represent a best-case scenario.
‘Achieving such levels will depend on events in the eurozone which are much worse than they have been in recent times.’
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