Euro plunges deeper against Sterling and the US dollar

The euro is taking another pounding as currency markets expressed doubts that recent promises to shore up the failing currency will come to fruition.

Sterling has hit the highest level for more than three and a half years, while the euro has sunk to a two-year low against the US dollar.

The message from the markets to eurozone leaders is they must take more decisive action to restore confidence as politicians gather for yet another summit this week.

The Pound was boosted by better than expected factory gate figures that disclosed manufacturing output rose 1.2% in April against a feared 0.1% drop.

However, the Pound slipped against the Dollar when Bank of England Governor Mervyn King revealed he saw no “great signs” of a recovery.

Sterling rose for a fifth day in a row against the euro, climbing 0.3% to 79.04 pence per euro. Rates last touched 79 pence in November 2008.

But the Pound fell 0.2% to $1.5502, after tipping to $1.5549.

Sterling has improved by 4.3% in the past 12 months, only shaded by the Japanese yen and dollar among the leading 10 developed-nation currencies.

King is worried a gaining pound will impact on exports by making them more expensive in Europe, which might further dent prospects for the finely-balanced UK economy.

“I am worried because sterling has risen over the past year. That’s going to be a challenge because of the state of the euro area. The economy has basically been flat for two years,” King told BBC Radio 4.

The Federal reserve has the same worries as King – and analysts predict more quantitative easing in both countries is the only way to suppress export costs and to reintroduce competitiveness.

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