The Treasury says that the pound must fall significantly further against the euro before the exchang...
The Treasury says that the pound must fall significantly further against the euro before the exchange rate would be favourable for adopting the euro.
The statement comes in one of the supporting studies published this morning ahead of the chancellor's statement on the single currency in Parliament this afternoon.
Knowledge of continued currency fluctuations could be important for advisers helping clients purchase property or other assets.
Sterling has already fallen about 9% against the European currency this year, and nearly 15% since October last year.
But today's exchange rate of about 1.47 euros to the pound does not represent enough of a fall, the Treasury says. Instead, the euro must strengthen to 1.37 to the pound – almost another 7% - for the UK economy not to be burdened with an unfavourable exchange rate, which would be fixed at the time the euro is adopted.
Peopld taking out mortgages on properties in popular holiday destinations in countries such as Spain, Portugal, France and Italy need to be made aware of the effects any further falls in Sterling could have – whether positive or negative.
Mortgages taken out locally in euros will become more expensive to service if the borrower is living in the UK and earning pounds, but those taking out mortgages in pounds will see the value of their property rise faster as the euro increases in value.
Other assets, such as portfolios of European holdings, will be affected too: those reliant on dividend income from European assets may be pleased, but it will also become more expensive to purchase such assets as the euro continues to appreciate.
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