(Source: Western Mail)
HOLIDAYMAKERS heading for sun abroad are facing up to a weaker pound after sterling fell on fears of a possible UK recession.
Wednesday's grim assessment on the economy from the Bank of England sent the pound to its lowest level against the US dollar for nearly two years.
It toucheda22-month low of EUR1.86 early yesterday, before settling at EUR1.87.
And the pound is also weaker against the euro, at E1.26 euro, signalling an unwelcome shift for tourists already hit by rising holiday costs and a dearth of cut-price getaway deals.
Tour giants Thomas Cook and TUI Travel have confirmed that they are hiking prices and putting fewer holidays on the last minute market as they slash capacity in the current economic uncertainty.
The pound has been weakening amid signs of sharply lower growth in the UK and the Bank of England saw sterling decline further after warning on Wednesday about flat growth at best over the next year and the possibility of a recession.
Meanwhile the pound is also suffering as the dollar gains strength, bouncing back from record lows.
The dollar plummeted to EUR2.1 against the pound last November amid concerns over America's economy but the greenback has been boosted as the weakening outlook in other global economies comes more in line with the US.
James Hughes, market analyst at CMC Markets, said: "The dollar continues to gain ground across the board as the global economic outlook begins to converge with that of the US.
"Certainly yesterday's comments by the Bank of England did little to help improve support for the pound with the prospect of zero growth in 2009 adding to downside pressures."
He added: "The question remains as to just how much moredollar appreciation can be seen, but so long as it is being driven by weakness elsewhere rather than an upturn in the US economy, there's arguably a lot of lost ground that needs to be made up."
While the pound's weakness is bad news for those travelling abroad, the strength of the dollar is helping the raft of UK companies with US-facing operations.
FirstGroup, which owns Greyhound in the US, has seen shares rise inrecent days, while medical equipment giant Smith & Nephew has also had some support from the pound's slide.
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