As millions of Brits are spending their summer holidays on the Continent, the pound has reached its weakest point against Europe’s common currency for eight years.
Sterling steadied on Tuesday after posting its biggest four-day decline in two months against the dollar as investors grew bearish about the outlook of the economy.
The British pound was trading around $1.3032 after weakening 1.4 percent in the last four sessions. It was the biggest four-day losing streak since mid-June, according to Thomson Reuters data.
The pound has been on a steady slide against the euro since last year’s Brexit vote. The eurozone economy has since picked up while the UK economy has slowed.
The uncertain, Brexit-affected macroeconomic outlook for the UK led the BoE’s Monetary Policy Committee (MPC) to hold rates at 0.25% and to continue the bank’s £435bn quantitative easing (QE) programme.
It has been a year since the MPC first cut the rate to a historic low of 0.25% amid worries of economic collapse and a drop in corporate confidence in the wake of the Brexit referendum.
Matthew Brittain, investment analyst at Sanlam UK, said: “This marginally more dovish sentiment has no doubt been helped by the departure of long-time hawk Kristin Forbes, and puts the BoE firmly back on track to its ‘slow and steady’ normalisation approach.
“We expect the BoE to remain dovish as the impact of the weaker pound becomes fully reflected in inflation data over the course of the next 12 months, allowing it to naturally drift back in line with global averages.”
The new low in the euro-sterling exchange rate has probably more to do with euro strength than with sterling weakness, however.
The trade-weighted euro has now appreciated 8% since the start of the year, with nearly this entire move occurring since the middle of May.