Bank of England Governor Mark Carney at an inflation report news conference in London on Thursday. Mr. Carney has said that officials would assess the pound’s strength when deciding when to lift borrowing costs.Anthony Devlin/Reuters
British graduate Alexander Troop has the Bank of England to thank for making his vacation a memorable one.
The 24-year-old trainee lawyer joins an upswell of tourists taking advantage of a surge in the pound as higher British interest rates loom. The currency is near the strongest level against the euro since 2007 and has climbed against every major currency this year except the Swiss franc.
"I chose mainly to stick to euro-zone countries and avoid Switzerland, which has a very strong currency," Mr. Troop said from Ljubljana, Slovenia, where he's in the final stages of a six-week backpacking trip. "I've been dining out more and drinking more because everything seems to be such good value. My €2 beer here costs me less than a third what it would in London."
Sterling bulls suffered a blow on Thursday, when the currency tumbled after the central bank said that only one policy maker voted to increase interest rates. The consensus in a Bloomberg survey was for a 7-2 split on the nine-member committee. Governor Mark Carney said at a press conference that officials would assess the pound's strength when deciding when to lift borrowing costs.
Even so, the pound is up 9 per cent in the past three months against a basket of developed-nation currencies.
Its surge means British vacationers see their money go further when visiting countries as diverse as Australia, Brazil and Canada. Buying €100 euros ($143) now costs just over £70, compared with about £80 this time last year.
Despite Thursday's temporary setback, the currency is being driven higher by speculation Britain will be the second major economy after the U.S. to raise interest rates. And the gains look set to continue, with traders paying more for options to hedge against further advances.
The stronger pound contributed to a 4 per cent jump in overseas vacations this year compared with the same period in 2014, the first increase in five years, according to the Association of British Travel Agents.
Britain's currency has jumped 10 per cent against the euro this year, peaking at 69.36 pence last month.