Plunging pound? You just need a holiday exchange, says Mr Travelex
Sterling’s drop against the euro and the dollar this week has left holidaymakers marooned. Or has it? Lloyd Dorfman, head of the world’s largest foreign exchange specialist, makes his travel predictions.
Lloyd Dorfman says British holidaymakers will soon rethink their destinations
“Inevitably, people who like to go to Europe will look to places such as Turkey, which is not in the euro and so it won’t be as expensive to outbound UK travellers,” says Lloyd Dorfman.
“Similarly, I think Asia may represent value. But the traditional, short-haul, European destinations are going to be expensive. When North America was $2 to the pound, everybody was happy to rush over there, but that’s now not the case. People will have to pay more or go elsewhere.”
Mr Dorfman acknowledges that there has been a flight to safety to the US dollar, which is strengthening against all currencies, particularly as the pound is weak against the euro. “So, it’s going to make those destinations expensive for outbound Brits. But I think people do want to go on their holidays, they will just change their destinations rather than sit here in unpleasant weather.”
What next for the pound? He says: “Having enjoyed several years of the strong pound, the speed and level to which it has weakened has taken everybody aback. Who is to know what is going to happen?
“The surprising thing has been the strength of the US dollar, because up until now, everybody has been very concerned about the level of the US deficit. And, of course, in recent months, that deficit would only have got bigger because they were coming up with all these emergency measures, which are going to require hundreds of billions of dollars. But everyone is so rattled by everything else that is going on in the world that the dollar has represented a flight to safety.
“Last week, we saw the historic event of US Treasury security rates going below zero. In other words, investors are now paying for the privilege of holding US Treasury bonds — without even wanting to have an interest yield.
“But the US has to raise hundreds and hundreds of billions of dollars, and you have to worry about the medium-term strength of the US dollar. At the same time, the requirement for the UK government to fund its emergency programmes is also great.”