Euro will plunge "within months"

On 12 January we wrote that the pound could recover against the euro in time for the summer holidays.

At the time the pound was worth 1.127 euros and $1.52. Now it is worth 1.086 euros and $1.38. So things have got worse.

Yet, an article in Monday's Telegraph sounded an optimistic note for the pound against the euro - just as we previously said.

According to the article, spread betters are betting on a correction to the euro in the coming weeks. David Buik of BGC Partners said: "Quite a significant correction in the euro is coming in the next few months. The European Central Bank is behind the curve in getting to grips with its economic problems." The euro, he went on to say, was at risk due to the slowness of European policymakers to react to the recession.

Don't buy your euros yet if you don't have to. Wait for it, but the pound could be on its way back.

Look for pound recovery by holiday time!

We have seen the pound plummet in recent weeks, but it did show a minor recovery last week, reaching 1.127 euros and $1.52 by the end of the week. There didn't appear to be a huge adverse reaction to the lowering of interest rates by the Bank of England to 1.5%.

It may be that currency traders feel that the worst is over for the UK economy (or at least, it can't get much worse), whereas it could actually get worse for those in the eurozone. Several European economies are struggling, but the eurozone interest rate is at 2.5%. There is still room for it to come down.

If the eurozone interest rate comes down and the UK interest rate appears to be stabilising, it could be good news for the pound. We might not see a return to the level of £1=1.5 euros, the rate for so long beyond a couple of years back, but at least we might get more euros for our money come the time for our summer holidays!