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Sterling weakens against the euro

Pound Sterling v Euro

Last Updated at 20 Nov 2017, 12:50 GMT GBP:EUR one month chart
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The UK pound has continued to weaken against the euro, falling below the 1.20 level for the first time since early April 2012.

Currency traders said that concerns over the UK's AAA credit rating and relationships with the European Union were undermining sterling's strength.

The pound was worth just over 1.19 euros in trading late on Thursday, making a euro worth about 83.5 pence.

That means UK tourists exchanging money are like to get fewer euros.

The pound has fallen 3% since 3 January, according to Bloomberg data, which Harry Adams, managing director at Argentex, said suggested that "2013 could be a disappointing year for sterling".

He said: "There are two main areas of concern for the pound: firstly, the loss of the UK's AAA credit rating which is becoming increasingly likely and secondly, Britain's unclear position in the EU.

"We only have to look back a few months to see that currencies react badly to uncertainty. The longer this debate drags on, the harder sterling will fall."

'Erosion'

The pound was also 0.3% lower against the dollar, hitting $1.5956 on Thursday, its lowest since 23 November.

"The UK economy is still very soft and that adds up to testing times for sterling," said Daragh Maher, foreign exchange strategist at HSBC.

He forecast the euro/sterling rate to reach 89 pence by the end of the year. "There's... going to be an erosion of the view that sterling was the best of a bad bunch," he said.

However, one impact of a weak pound is that UK exports are likely to be cheaper.

On Tuesday, the Fitch ratings agency warned that the UK's top-notch sovereign credit rating could be cut if the Chancellor of the Exchequer's March budget shows debt levels continuing to rise.

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